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What is the F1 Cost Cap?

  • by: Harvey Kennard
  • On: 16, Nov 2022
3 min read

There are many things that go into making a champion F1 team: skill, knowledge, ingenuity. But one thing matters most, especially if you don’t have it, and that’s money.

 Until recently money was one of the biggest factors in deciding who would win races. Much like how a sports team with billions to spend can afford to just buy all the best players, the F1 team with the biggest budget could afford to build the best cars, making them more likely to win.

So the cost cap was introduced in 2021 to create a more level playing field between teams, to make the racers fairer, more about the skill of the drivers, and more exciting for the fans to watch.

What is the F1 cost cap?

The cost cap applies to money spent on running the car at a race. This covers all components, including spares, garage equipment, and development.

Due to their complexity and expense, engines are not included in the cost cap. However, engine development costs are covered by a separate cost cap, so it’s clear F1 is taking budgeting seriously.

FIA introduced a fixed season budget for each team of around £131 million. This is significant when you consider that some of the leading teams were spending more than £200 million a season before 2020.

Why is the F1 cost cap important?

The cost cap is important because without it, only the top teams would ever win. Racing is an expensive sport, and while the winning teams receive a lot of prize money, sponsorship deals, and merchandise sales, the lower teams don’t see anything close to those sums. That means they have less to spend on their training, experimentation, iteration, and final builds.  

The first yearly report on the cost cap was published in October, and it’s clear that, while a great idea in principle, it’s been hard to pull off in practice.

What happens if you go over the F1 cost cap?

 It depends on how much you go over the cap, but if a team is found to have gone over, they will not be issued with a certificate of compliance, and a panel of independent judges decide on the appropriate punishment.

Here are some of the possible penalties for exceeding the F1 cost cap:

Minor breach (under 5% overspend)

 Deduction of team’s points

Suspension from one or more stages of a competition

Reduction of the overall cost cap

 Major breach (over 5% overspend)

Deduction of team’s points

Suspension from one or more stages of a competition

Suspension from an entire competition

Reduction of the overall cost cap

Exclusion from the championship

It goes without saying that FIA needs to ensure the cost cap rules are taken seriously, or no one will abide by them.

For overspending, Red Bull must pay $7 million to the FIA, and they also received a 10% reduction in allocated Restricted Wind tunnel Testing and Restricted CFD limits. 

Mercedes team principal Toto Wolff has said Red Bull’s overspending was "an open secret", and it’s clear that even a small amount of extra budget can really give a team an edge, in this case unfairly.

The F1 cost cap came from the desire to make the sport less predictable, and more exciting. While it will never be able to completely move away from the influence that money has over performance, this move to create a more equal starting point for the teams is a welcome move that may well make the sport even more exciting as teams battle it out for victory based on who’s the best driver, not the biggest spender.

Learn what it takes to work in Formula One, or read what we think are the best Formula One circuits of all time.

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