Areas of expenditure for Formula 1 teams: Formula 1 has long been a sport defined by speed and spending. Even with the introduction of the budget cap in 2021, the financial demands of competing at the highest level remain enormous. While the cap has changed how teams allocate resources, examining what it includes and excludes reveals just how complex team finances are in modern F1.
The Budget Cap Framework
In 2024, the official budget cap was set at around £100 million per team per season. However, this figure applies only to certain operational aspects and excludes several key areas of expenditure.
The cap’s purpose is to promote balanced and sustainable competition, preventing the wealthiest teams from endlessly outspending their rivals. Nevertheless, running a Formula 1 operation still costs hundreds of millions of pounds once exclusions are considered.
Driver and executive salaries
One of the most significant exclusions from the budget cap is driver salaries. The pay packets of Formula 1’s top stars are negotiated independently of the spending limit. Drivers such as Max Verstappen and Lewis Hamilton can earn tens of millions of pounds per year, including bonuses and endorsements. These costs remain entirely outside the team’s capped spending.
The same exemption applies to the three most senior executives: the team principal, technical director and financial director. These leadership figures are crucial to a team’s performance both on and off the track, and their compensation is considered separately from operational costs.
Marketing, travel and hospitality
Another major expense category excluded from the cap involves marketing and promotional activities. Given Formula 1’s global reach, teams invest heavily in branding, fan engagement, sponsorship activations, and media content.
Travel and hospitality also represent significant expenditure. Each team must transport cars, spare parts and hundreds of staff members to over twenty races worldwide.
Costs associated with flights, freight, accommodation, on-site operations, and the lavish hospitality suites for sponsors and VIPs are all exempt from the budget cap.
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Power units and engine supply
Engines, or power units, are another major area of expenditure that lies outside the cap. Each team either manufactures its own power units or purchases them from an engine supplier, such as Ferrari, Mercedes, Honda, Renault or Red Bull Powertrains (RBPT).
These hybrid engines, with their complex combination of internal combustion and electric systems, are subject to separate cost regulations. The price per season for engine supply can amount to tens of millions of pounds, but these expenses are managed through distinct contractual arrangements.
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Where the Cap Applies
The budget cap primarily targets areas that directly influence car performance and development. This includes research and development, as well as the design and manufacture of the chassis, aerodynamics and other critical performance components.
The purpose of this is to prevent any team from gaining an unfair advantage through unrestricted technological spending.
Teams must now allocate resources with surgical precision. Every expenditure is evaluated in terms of its potential performance gain. Financial efficiency is now as important as technical innovation, forcing teams to balance risk and reward in every development decision.
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Consequences of overspending
Violating the budget cap has serious consequences. Red Bull’s breach in 2021 is a notable example of this, resulting in a fine and reduced wind tunnel testing time. This penalty directly limited their potential for developing future cars, highlighting how important financial discipline is for maintaining competitiveness.
Today, Formula 1 is a game of fine margins, both on the track and in the balance sheets. Teams must maximise the value of every pound spent to improve performance without crossing the regulatory line. In this era of financial scrutiny, success in Formula 1 depends as much on smart budgeting as it does on speed and strategy.
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Lewis Hamilton now has the worst ever record for a new driver joining the Ferrari team in 75 years of history. His much vaunted arrival in Maranello has gone incredibly sour as the former Mercedes six times world champion is running out of road.
The British driver’s racing statistics are plummeting as the world’s most winning F1 driver is suffering an end of career crisis. With just two Grand Prix wins in the last four seasons – one of those gifted to him by his team mate’s disqualification has seen Hamilton’s all time win to race start ratio collapse.
In his last 88 starts Lewis has just the two wins and so his career stats have collapsed from a nigh on a record 35% win rate to just 27.93% behind both Michael Schumacher (29.55%) and his arch rival Max Verstappen (29.69%) For the record Jim Clarke remains top of this list with a win ratio of 34.25%, although his 73 Grand Prix career was cut short by a tragic early death.
Worst record as a Ferrari driver
Hamilton now holds the worst ever record for a new Ferrari driver in terms of races before he claims his first podium for the Scuderia. The previous record of eighteen was held by ‘also ran; driver Diddier Pireoni now Hamilton is the latest Ferrari driver to sit in the shadows.
Meanwhile, without the advantage he had in the SF-25, Charles Leclerc has been making th best of a bad job in 2025. He has seven podiums after his triumph in Mexico and leads his champion team mate by 210-146. The Monegasque driver is 15-5 ahead in Grand Prix qualifying and has finished a whopping 17 times ahead of his most decorated team mate.
Yet Hamilton in his previous three years since losing out on a record eight F1 drivers’ championship has been a shadow of his former self, with George Russell beating him year in and out. Russel had one more win (although Lewis was gifted one) than Hamilton in their three years together at Mercedes, but in their final season together the statistics were crushing for Lewis…READ MORE ON THIS STORY
Alex Stanton is a Formula 1 journalist at TJ13 with a focus on the financial and commercial dynamics that underpin the sport. Alex contributes reporting and analysis on team ownership structures, sponsorship trends, and the evolving business model of Formula 1.
At TJ13, Alex covers topics including manufacturer investment, cost cap implications, and the strategic direction of teams navigating an increasingly complex financial environment. Alex’s work often examines how commercial decisions translate into on-track performance and long-term competitiveness.
With a strong interest in the intersection of sport and business, Alex provides context around Formula 1’s global growth, including media rights, expansion markets, and manufacturer influence.
Alex’s reporting aims to explain the financial realities behind headline stories, helping readers understand how money, governance, and strategy shape the competitive order in Formula 1.
