Definition
An auction premium (or "buyer's premium" / "seller's premium") is the percentage fee charged by an auction house in addition to the hammer price. Most major auction houses charge both a buyer's premium (paid by the buyer on top of the bid) and a seller's premium (deducted from the consignor's proceeds). Combined, they're how auction houses make their margin.
Why it matters
Auction premiums are negotiable for valuable consignments. Consignors should compare premiums (and reserve policies) across houses before consigning.
Example
A jersey hammers at $10,000 with a 25% buyer's premium and a 10% seller's premium. The buyer pays $12,500. The consignor receives $9,000.