You can have up to 20 active characters, so yes one would need to be deleted. Here is a post from CMs from the forums when Char Bazaar was released:
Not counting tournament characters, Your account can contain a maximum of 25 characters, with a maximum of 20 active characters (the other 5 spots can be filled with characters marked for deletion). If you were to have 25 characters, you'd have to wait until a character is finally deleted in order to make room for a new character, including characters you want to bid on. The current error message which you've mentioned is a little unclear in this regard and will be amended to reflect this requirement. If you were to have less than 25 characters total on your account, but 20 active characters, you could delete a character to immediately make room for a character you want to bid on. Unfortunately there isn't a way to speed up the final deletion process.
https://www.tibia.com/forum/?action=thread&postid=39034992#post39034992