Penny auctions may leave you feeling pound foolish

For the last few years the online auction business has been dominated by big name players, most noticeably EBay.

It was inevitable that sooner or later someone would step in and try to push them aside – and that push has begun in earnest with the introduction of penny auctions.

Although the new style auctions each have their own individual names these sites are generically dubbed penny auctions because the bid increments are set at a measly ‘penny’ per bid. You may even have seen the glitzy ads on TV or in the press for such alternative ‘online auctions’ promising terrific bargains.

The hype surrounding penny auctions promotes the idea that you can, for instance, buy a brand-new, still in the box, high-tec $800 computer for as little as $9.95. Sounds fabulous – a new computer for next to nothing and a dramatic saving of around $790 – how cool is that? It’s like something for nothing - ‘sign me up!’ I hear you shout. Well wait my friend and we shall see.

The penny auctions are, for the most part, operating legal and legitimate businesses operating quite openly. However, and there has to be at least one ‘however’; the savings you make may not actually be savings at all!

Unlike the more traditional online auctions, penny auctions have a couple of non-traditional terms and conditions. Unlike a regular auction, be it online or a conventional ‘in house’ auction with penny auctions you have to actually pay up-front to be able to take part and place your bid; some even charge an additional membership fee before you can take part.

At a conventional auction you place your bid on what you want; if you’re the highest bid - it’s yours, or to use the current term - you win! Simple, though at some auctions you may have to pay an additional ‘buyer’s premium’ of anywhere from 10 to 25 per cent. Once the premium of 25 per cent is added your ‘winning bid’ of say $100 the total owing would come to a hefty $125 – and don’t forget that there can be additional P.S.T. on top that.

Many penny auctions charge a fee each time you place a bid and as the bidding increments are set at a mere penny per bid you may have to place as many as 225 bids to win something which eventually sells for $5.

To give an example, let’s say the item you really want is ‘listed’ at a ridiculously low start price of just 50 cents. How can you resist? After all it’s 50 cents plus a penny - what a deal! Or is it? To get from the start price of 50 cents to $5 we need there to be 450 bids at a penny per bid. So if there are two of you bidding you will need to place around 225 bids (depending upon who bid first). In the heat of the moment you have probably forgotten that win or lose for each bid placed it’s going to cost the bidder 60 cents.

Remember, although you are bidding in penny increments you will have to actually pay the auction company 60 cents for each penny you bid - so if my math is correct, your 225 bids charged at said 60 cents per is going to set you back $135 in bidding fees alone - and that’s on top of the $5 you owe for the item you ‘won’. So what you thought was a $5 bargain will actually cost you $140 plus applicable taxes and any shipping fees.

Meanwhile, equally caught up in the bidding frenzy your competitor bidder (who goes away with absolutely nothing other than the pleasure of bidding) has placed 224 bids also costing 60 cents per bid thereby giving the auction house an additional $134.40.

Not quite the deal either of you were expecting, eh? Well while you await your ‘win’ to arrive the penny auction promptly collects $274.40. Not a bad profit for apparently very little effort eh?

But wait - there’s more! To take part in many a penny auction you have to make an initial purchase of a ‘bidder’s package’ meaning that before you are awarded the privilege of placing a single bid you must pay money ‘up front’ as well as supplying your credit and or banking information.

Not only that, although each of the auctions has a time limit, every time a bid is placed the limit is extended by a further 10 or 20 seconds. This time extension is apparently done to keep it ‘fair for everybody who may want to bid at the last moment.’ However, in reality, the extension has the effect of causing the bidders to become embroiled in a ‘bidding war’ thereby causing the punters (bidders) to throw caution to the wind and keep bidding; after all, ‘it’s just another penny.’

It’s not a bad world within which we live but there are cautions and precautions which we would all be wise to take. The phrase ‘buyer beware’ originated for a reason. As for taking part in any penny auctions do a little research beforehand to check the terms and conditions and perhaps take the time to take a look at the excellent informational video blog of Oct. 20 2011 by CTV’s consumer affairs expert Pat Foran. Look for him at

Meanwhile happy (bargain) hunting and let’s hope you do find that elusive ‘penny bargain!’


Tony Duke provides comprehensive appraisal services for Estate Planning, Down-sizing, Probate, Property Division, Insurance, Antique Acquisitions and Sales. See Tony’s website, for information. Send your appraisal and antique questions to:

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