The two-seater sports car, made in 1929, was sold to an anonymous buyer at an auction at Goodwood on Friday.
It was one of several cars owned by George Milligen, a private collector who died this year after amassing a collection of vintage cars on his farm in Norfork
He bought it for a few hundred pounds in 1941, at the height of World War II, when almost no one in Britain would buy a German car.
The Mercedes-Benz SKK was one of only 36 ever made. The world's most expensive car remains a 1930 Bugatti Type 41 Royale, one of only six made, which sold at auction in 1987 for £5.5 million.