Cellars 101: How to Buy Wine at Auction—Factoring in the Extra Costs
Insider tips to help you plan your spending before the gavel comes down
You buy a case of wine at auction for $1,000. Yet when the invoice arrives, the total charges exceed $1,330, and they come with a reminder that any unpaid balance after a 14-day period is subject to a 2 percent late fee. What's going on?
This isn't some form of chicanery, but simply a function of the rules and regulations, published in every auction catalog under "conditions of sale." There's absolutely nothing "hidden" about the charges—that information is always there in plain view. Yet too often, collectors do not closely read the terms. Here's a guide to what you can expect:
THE BUYER'S PREMIUM
The most important "condition" affecting a successful bidder's cost is the buyer's premium, a non-negotiable surcharge levied by commercial auction houses that ranges from 14 percent to 22 percent of the "hammer price," or winning bid. Along with the consignor's fee (charged only to sellers), the buyer's premium is a major source of revenue for an auction house. The rate is clearly stated in the catalog and is customarily announced by the auctioneer before the sale commences. It is surprising, however, how many buyers fail to factor it into their bidding strategies. In other words, a $1,000 winning bid will cost you an extra $180 if the buyer's premium is 18 percent, $220 if the premium is 22 percent.
OTHER CHARGES
Additional "conditions of sale" may also apply. There can be a repacking fee of $10 if the wines were part of a mixed lot. An additional $10 may be charged if the buyer wishes to keep the original wooden case (owc) in which the wines were shipped. Some firms levy an extra percentage point for insurance that will cover breakage or loss in transit to your point of destination.
SALES TAX AND DELIVERY
Next in line is sales tax. Applied to the sum of the above items, it will vary depending on the location of the auction. Among major U.S. cities that hold auctions, New York adds 8.875 percent. In San Francisco, it is 9.5 percent, and in Chicago, it's 10.25 percent. Unless you have a commercial resale license, sales tax is mandatory.
Delivery charges (not subject to sales tax) will also vary based on location. Acker Merrall & Condit offers free freight within the New York metropolitan area. Zachys charges $9.50 per delivery, and Sotheby's charges $25 for one to 10 cases. If you are shipping out of state (assuming it is legal to do so where you reside), costs can run considerably higher. If you do not wish to take immediate delivery of your wine, storage fees may apply.
PERKS FOR PROMPT PAYMENT
On the plus side of the balance sheet, some auction houses offer a discount for prompt payment. Hart Davis Hart gives a 1 percent credit toward future purchases if payment is rendered within five business days of the sale. Bonham's offers a cash discount on a sliding-scale basis. You can also pay by credit card at some auction houses (up to a maximum of $10,000 to $25,000), but why add APR finance charges to an already inflated bill?
Want to know how much of the final gavel price you'll see when selling a bottle of wine? Read How to Sell Your Wine at Auction.
