The only remaining privately owned fragment of a Jane Austen novel in the author's own handwriting has sold at auction in London for nearly £1m, three times its estimate.

The heavily corrected manuscript from The Watsons, written in about 1804, was acquired by the Bodleian library at Oxford for £993,250 at Sotheby's. The hammer went down to a round of applause, since the lot had been estimated to reach £200,000-£300,000.

The 68 pages, hand-cut and bound into 11 small booklets by the author, are thought to be a quarter of the original length. A further dozen pages, sold to raise money for the Red Cross during the first world war, are at the Pierpont Morgan Library in New York, and some others were lost from the library of Queen Mary, University of London about six years ago.

None of the original drafts of Austen's completed novels survive, with the exception of discarded chapters of Persuasion and the unpublished Lady Susan.

The Watsons was not finished, possibly because its plot reflected Austen's life at the time, concerning as it does the daughters of a sick and widowed clergyman who dies, leaving them impoverished. The Rev George Austen died in 1805. Shafts of Austen's wit can be discerned through crossings out and amendments, including the line: "Female economy will do a great deal, my lord, but it cannot turn a small income into a large one."

The author Margaret Drabble describes the work as "a tantalising, delightful and highly accomplished fragment, which must surely have proved the equal of her other six novels had she finished it".

Richard Ovenden, the Bodleian's deputy librarian, said it was delighted to succeed in saving The Watsons for the nation. "The manuscript is such a valuable part of our literary heritage," he said. "We will make the manuscript available to the general public, who can come and see it as early as this autumn, when The Watsons will be a star item in our forthcoming exhibition, Treasures of the Bodleian."

The library was helped with a substantial grant by the National Heritage Memorial Fund.