We all know that running a Formula One team is stupidly expensive, but we don’t often talk about the fact that these teams still have to pay money to the series every year to have the privilege to compete—which can often be an absurd amount of money. Today, we’re going to run you through exactly how those entry fees work.
(Welcome to Motorsport Explained, the series where we break down racing rules and concepts in easily digestible ways for all the beginners out there. If there’s something you’ve always wondered about or something that has never made sense, leave your topic in the comments or email me at eblackstock [at] jalopnik [dot] com.)
Most racing series require an entry fee, and many of them have done so for ages. Historically, the entry fee would go toward the monetary winnings for the team or driver that took the checkered flag. A simple way to put together a pot of money for the winner to take home at the end of the night.
Eventually—especially in F1—entry fees evolved as a way to make a commitment. It was a way F1 teams agreed to compete for the whole season, since the series doesn’t encourage part-time teams the same way that IndyCar does. In fact, F1's whole schtick is that you’ll see the same number of cars on the grid, usually with the exact same drivers, from the first race to the last.
As prices skyrocketed, the entry fee also became a significant barrier that prospective teams needed to clear. It could take tens of millions of dollars just to guarantee you’d have a seat at the table for the upcoming season, so not just any team can roll up. You not only need a car and a team, but you need to prove that you have the money for an entry fee. Essentially, a way to keep the ragamuffins out.
As you can imagine, skyrocketing prices are not super encouraging. For a while, entry fees were uncapped, to the point where it almost effectively barred anyone from taking part.
So, in 2013, Formula One reorganized its finances and decided that there would be a low base entry fee, plus an additional amount of money based on the points that team scored during the previous season. That way, you don’t have a backmarker team scrounging for pennies because it had to pay as much as the previous year’s dominant team to take part.
Each year, the base cost of entering a team lines up with the US Consumer Price Index.
It makes sense. A base cost ensures that each team is paying something to take part, which still keeps that barrier to keep out the rabble and prevent everyone and their brother from claiming they’re going to take part in the F1 season. It’s also a little check against the dominant teams. Sure, you had a good car this year, but by paying more than anyone else to take part next year, you might have to compromise in development and give other teams a chance to catch up.
If you’ve watched F1, you know that’s something of a pipe dream. But, it’s good in theory.
Because the 2020 F1 season was abbreviated by the COVID-19 pandemic, there were fewer opportunities for teams to score points, which means that entry fees for 2021 are going to be lower.
Now, let’s run you through where the money comes from.
- Each team must pay a base price of $556,509 when they apply to enter for the season. That cost rises each year in line with the US Consumer Price index.
- The world championship-winning team must pay $6,677 per point scored.
- Every other team must pay $5,563 per point scored.
- That money must be paid by the end of the year, as soon as official points are tallied.
Mercedes was by far the most dominant team in 2020, but it only scored 573 to last year’s 739. That’s a difference of over $1.1 million. Overall, the FIA lost $2,837,130 due to the loss of five races in 2020.
So if you’re wondering why the FIA keeps cramming a seemingly unreasonable number of races into a single season, you have part of your answer. Money.
There was also another wrinkle in the plans this year: Racing Point was fined 15 World Championship points for being charged with illegally utilizing Mercedes’ brake duct design. That’s not a punishment that’s handed out lightly, considering the fact that it essentially costs the FIA money.
Just because a brand new team hasn’t scored points before in F1 doesn’t mean that it’s exempt from a hefty entry fee. Oh no.
Your entry fee is $200 million. That money is then distributed to all the current teams as a sort of compensation for there being a new team that could possibly take away their points-scoring opportunities and, thus, money-making opportunities.
McLaren and Mercedes’ team principles have both defended the $200 million cost cap, saying that it basically requires that team to have its shit together and therefore not waste anyone’s time. Whether or not you agree likely depends on your consumption of other racing series. IndyCar, for example, has seen an influx of new teams, largely because those teams are able to slowly integrate into the series with an increasing number of races each year.
But, hey. Accessibility is not really the name of the F1 game.