SportF1F1 cost/expense limit: what it is, how it works,...

F1 cost/expense limit: what it is, how it works, penalties, etc

There are some sports in which it is not necessary to pay or make a large financial outlay, such as athletics, swimming or wrestling. Motorsport, and Formula 1 in particular, has always been the antithesis of those disciplines.

Since its inception, large amounts of money have always been needed to even enter a single F1 grand prix. Most of the drivers come from wealthy (or connected) families, without which they would not have made it onto a grid like Formula 1. The cars they drive have the best technology in the automotive world and are backed by big brands that want Prove that your products are the best. Ultimately, that is a battle that cannot be won without money.

However, as has happened in other sports, although in Formula 1 they arrived much later, they have found a way to force the teams to tighten their belts to avoid large waste and improve competitiveness so that it goes beyond what economic.

What is the Formula 1 cost or expense limit? Definition of the budget limit

F1’s cost cap or budget cap or ceiling sets the exact amount of money a team can spend over the course of a calendar year . It first came into force in 2021 and the original plan, which was created before the pandemic, was to put it at $175 million. But when COVID-19 wreaked havoc on the 2020 season, with some teams entering dire financial straits, it was reduced to $145m (about €128m at the time, €150m at current exchange rates).

The plan also called for a $5 million reduction in 2022 and 2023, allowing only minor inflation-related adjustments after those seasons. However, these adjustments have already begun to be applied after the exorbitant rise in prices that the world economy has suffered during this 2022.

Why did Formula 1 introduce a budget cap, a spending limit?

Some teams have practically unlimited budgets, while other teams must work with a much more modest amount. That tends to be related to on-track performance, so it’s almost impossible for the “lower” teams to match the pace of the more powerful ones in that regard.

Therefore, what the cost limit seeks is to equalize the conditions between all the teams, but at the same time it also tries to guarantee the survival of each and every one of the grid structures . Furthermore, in a world where there is an increasing emphasis on savings and sustainability, it is also a step in that direction for a category that many consider excessively wasteful.

Charles Leclerc, Ferrari F1-75, Max Verstappen, Red Bull Racing RB18, Sergio Pérez, Red Bull Racing RB18, George Russell, Mercedes W13, Carlos Sainz, Ferrari F1-75, Lewis Hamilton, Mercedes W13, el resto en la salida

What aspects fall under the Formula 1 cost cap?

Any expense related to the performance of the car – but not the engines – counts towards the cost limit of motorsport’s top flight. That includes:

  • All F1 car parts (from the steering wheel to the wheel nuts)
  • All the elements necessary for the operation of the single-seater
  • Almost all the staff of the F1 team
  • All the equipment of the F1 garage
  • All F1 car spare parts
  • F1 transport costs

The FIA’s main focus is on car development costs, so teams have to decide what development work to carry out and what not to do, how much is spent on each part that is made and how many parts of the same specification. they need and can afford without overspending on their bills.

What is not included in the cost limit of Formula 1? What is not taken into account

There are several important aspects that are not covered by the cost limit, such as:

  • The salary of F1 drivers
  • The salary of the three highest paid staff members
  • F1 travel expenses
  • F1 marketing expenses
  • Real estate and legal costs
  • Ticket rights and licenses
  • Any activity not related to F1
  • Payments for paternity or sickness
  • Employee premiums and staff medical benefits

The engines, since it is a more unequal and complex expense, because some teams manufacture them and others buy them, they are monitored by their own cost regulations.

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What are the penalties for exceeding F1’s cost cap?

Leaving aside the possible problems related to the procedures for submitting these reports, there is a clear line that separates the two different ways of exceeding the cost limit:

  • Exceeding the established amount by 5% or less is stipulated as a “minor expense”.
  • If 5% of the total amount is exceeded, the teams will face a “material excess”.

However, the list of punishments and sanctions that separates both cases is quite confusing.

The expenses of an F1 team are not easy to regulate and monitor, especially when going into detail, so the rules have been drafted to impose penalties on a case-by-case basis.

For the same reason, the list of sanctions that can be applied is similar for both infractions: Deduction of points in the same season of excess (remove points), exclusion from some events, fines and limitations in wind tunnel aerodynamic tests. .

But there is a key difference, if you have exceeded more than 5% you can be excluded from an entire championship , which would erase any success or result achieved throughout an entire course.

Who decides the penalties for teams that exceed the cost limit in F1?

Sanctions will be imposed by the Cost Limit Adjudication Board , a group made up of six judges, all proposed between the FIA and the teams themselves.

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