OBJECTIVES Describe the association between the purchase price of Thoroughbred yearlings sold in Australia and racing performance as 2- and 3-year-olds. METHODS Race performance data of 2773 Thoroughbred yearlings sold at auction during 2003 were collected. Associations between purchase price and the probability of starting, the number of race starts and the prize money earned were examined. RESULTS In total, 2206 (79.6%) horses started a race. The mean number of race starts was six and the mean prize money earned was A$24,420. A total of 1711 (61.5%) horses earned prize money, 402 (14.4%) earned more than their purchase price, 312 (11.2%) earned more than A$40,000, the estimated cost of training, and 142 (5.1%) earned A$40,000 more than their purchase price. There was a positive association between purchase price category and the probability of starting, number of starts, earning prize money and earning greater than A$40,000 (P < 0.001). Purchase price category was negatively associated with the probability of earning greater than the purchase price (P < 0.001). The proportion of horses earning greater than the purchase price plus $40,000 was significantly different (P = 0.03) among the five price categories. CONCLUSION Yearling purchase price was positively associated with all race performance outcomes measured and researchers examining the race performance of yearlings purchased at sales should consider including purchase price when modelling. The Thoroughbred yearling market in Australia behaves in a similar manner to the United States market; owners pay a premium to enter the sport of racing and an additional premium in the quest to own a champion.