F1 team budgets sit at the heart of the sport. Every upgrade, every strategy call, and even some driver moves link back to money. Today, the sport runs under a strict cost cap, yet real spending still reaches hundreds of millions of dollars per team.
Because of this, fans search for F1 Team Budgets to understand why some teams fly and others fight to survive.
Why F1 Team Budgets Matter More Than Ever
In the past, the richest teams could spend close to half a billion dollars a year. Mercedes, Ferrari, and Red Bull were reported to be around the 400–500 million dollar mark in the late 2010s.
Since then, rules have changed. Yet the core truth remains. Money buys people, tools, factory time, and upgrades.
Team budgets affect:
- How fast can a car be developed across a long season
- How quickly can damage from crashes be repaired
- How many simulations and wind tunnel runs can the team run
- How attractive the project looks to top engineers and sponsors
At the same time, Liberty Media and the FIA want a closer field and stable teams. Therefore, they use a cost cap and a complex prize money system to balance pure spending power with fair competition.
The F1 Cost Cap Explained In Plain Language
The cost cap is a spending limit on most performance-related areas of an F1 team. It came in for 2021 and has been tightened since.
Key headline figures:
- 2021: 145 million dollars
- 2022: 140 million dollars
- 2023 onward: 135 million dollars as the base cap, adjusted for inflation
- 2024–2025: base 135 million dollars, plus extra money for races beyond 21, and indexation for inflation, so the absolute limit sits closer to the 150–160 million dollar range
The cap uses a base calendar of 21 races. When the season has more races, the FIA adds an allowance per extra race. The 24-race calendars for 2024 and 2025 add approximately $ 5.4 million to the cap.
So F1 team budgets now include a capped racing side. Teams must fit car design, development, and race operations into that pot. If they overspend, they risk fines, loss of wind-tunnel time, or even point deductions. Red Bull’s earlier overspend case showed how serious the system can be.
What Counts Inside F1 Team Budgets – And What Does Not
The cost cap covers “relevant costs”. These relate to building and running the car on the track. The FIA’s financial regulations give long lists, but in simple terms, the cap includes:
- Car design, aerodynamics, and chassis development
- Most factory staff are linked to performance
- Parts, materials, and updates
- Race weekend operations and many support costs
However, several large items sit outside the cost cap. That is why total F1 team budgets can still reach over 300 million dollars even with a 150–160 million dollar practical racing limit.
Major exclusions include:
- Driver salaries
- The three highest-paid team executives
- Marketing and hospitality
- Heritage activities and some junior programmes
- Power unit development (under a separate engine cost cap)
Because of these exclusions, the headline cap number tells only part of the story. Big brands can still use their commercial muscle to boost the overall operation. Smaller teams gain protection, but they do not suddenly match the giants overnight.
How Much Do F1 Teams Really Spend?
Official figures remain private. Yet plenty of estimates and historic accounts give us a range. Before cost control, top teams like Mercedes and Ferrari were reported to spend between 400 and 500 million dollars per year, including all areas.
Today, the picture looks different, yet still expensive.
Rough patterns look like this:
- Front-running teams
These outfits usually hit the full cost cap on the racing side. When you add driver pay, senior management, marketing, hospitality, and wider group costs, analysts still place some operations above 300 million dollars per season. - Midfield teams
Many of these teams now operate close to the cap, which did not happen ten years ago. Their total budgets may sit in the low to mid $ 200 million range, depending on backing from manufacturers or investors. - Smaller independents
These teams previously fought to reach $ 150 million. The cap helps them stay closer. Still, they tend to run leaner marketing departments and smaller non-performance operations compared with the heavyweights.
You also need to factor in team valuations. Recent reports show that every F1 team now has a value of over 1.5 billion, with Ferrari leading at over 6 billion, and the whole grid worth over 34 billion combined.
Source: Deposit Photos
When you combine these valuations with huge team budgets, F1 looks less like a niche sport and more like a global entertainment business.
Where F1 Team Budgets Come From
Every F1 budget starts with income. Teams cannot just spend what they want. They need money coming in from several sources.
Main revenue streams include:
- F1 Prize Money
Liberty Media shares around half of the sport’s central revenues with the teams. Payments depend on championship position, history, and special deals. Recent figures suggest prize money has passed 1.25 billion dollars per year across the grid. - Sponsorship and Branding
Title sponsors, technical partners, and smaller logos pay to appear on the car and team kit. Top teams can sell these positions for tens of millions each. New sponsors often join when results improve, as seen with big deals at McLaren and Ferrari. - Manufacturer Backing
Works outfits gain funding and technical support from parent companies like Mercedes, Ferrari, and Audi. This backing can cover engine costs, R&D tools, and infrastructure. - Drivers and Partners
Some drivers bring significant backing through personal sponsors. In addition, partners like oil companies, tech firms, and consumer brands use F1 as a marketing platform.
Because these streams move each year, F1 team budgets shift constantly. A title win can boost revenues. A sponsor exit or a poor season can force painful cuts.
How The Cost Cap Is Changing The Competitive Order
The main goal of the cost cap and the new Concorde Agreement is competitive balance. Ten years ago, money almost entirely predicted performance. Today, the link remains strong yet weaker.
The cap has driven several trends:
- Smaller teams can now match big factories on wind tunnel time and CFD usage
- Efficiency and smart spending matter far more than raw budget
- Mistakes in development carry a higher cost, because you cannot just spend your way out
Recent seasons have shown tighter qualifying gaps and more podiums for teams outside the traditional “big three”. McLaren’s rise back to title contention on a profitable business model is a clear example of how controlled spending can still deliver peak performance.
At the same time, cost cap investigations and rumours continue to make headlines. The FIA’s 2024 cost cap review took seven months. In the end, all ten teams stayed under the limit, though Aston Martin picked up a minor procedural breach for late paperwork.
So F1 team budgets are now not only a sporting weapon but also a regulatory minefield. One accounting slip can bring penalties even if the car itself never overspends.
The Next Wave – 2026 Rule Changes And New Teams
The next big shock to F1 Team Budgets will come in 2026. New technical rules arrive, new power units hit the track, and a fresh financial framework takes shape.
Key points to watch:
- Proposed raise in the cost cap
Reports suggest the team’s cost cap will rise from the 135 million dollar base to around 215 million dollars starting in 2026. This change aims to cover the extra cost of new engine rules and a likely 11th team. - Cadillac’s entry and the anti-dilution fee
Cadillac, backed by General Motors, has approval to join in 2026. To protect the existing 10 teams from prize-money dilution, the new outfit must pay an anti-dilution fee of roughly 358 million pounds, far above the previous figure of 200 million dollars.
Because of this, each current team keeps a substantial slice of the revenue pie even with another entrant. Yet the fee also shows how valuable a spot on the grid has become. Any new ownership group must accept a huge upfront cost before even building a car.
What F1 Team Budgets Mean For Fans
For fans, F1 Team Budgets can seem distant. However, the numbers shape the product you consume.
Budgets influence:
- How many teams can fight for wins
- How long can smaller teams survive a run of bad seasons
- How quickly can the sport react to shocks like a pandemic or an energy crisis
- How attractive F1 looks to new investors, sponsors, and manufacturers
Today, every team is a billion-dollar asset. Sponsors queue up. Netflix and social media continue to drive global interest. Yet the cap tries to keep the sporting contest fair enough that new stories can still emerge.
So when you hear about the F1 cost cap, think of it as a safety rail. F1 team budgets remain enormous, but the rails stop the richest outfits from running away forever.