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What’s it cost to compete in Formula One? An IndyCar comparison

May 22, 2013, 12:30 PM EDT

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Christian Sylt and Caroline Reid cover the business of Formula One. More of their work can be found at FormulaMoney.com.

The cars lining up to compete in this weekend’s Monaco Grand Prix and Indy 500 may appear the same. However, with even the smallest Formula One teams running on budgets around five times those of their leading IndyCar rivals, the similarity is only skin deep.

The casual observer might be forgiven for thinking that IndyCar has the superior technology, as Ed Carpenter set a pole position lap speed of 228.8 mph for this year’s Indy 500; Mark Webber’s top qualifying lap at the twisty Monaco track last year was just 100.4 mph.

In reality, the IndyCar teams purchase controlled-cost specification chassis from Dallara, whereas their F1 counterparts are involved in a costly high tech arms race to make it to the front of the grid. Unlike IndyCar teams F1 competitors are ‘constructors’ who build their own chassis — and in the case of Ferrari and Mercedes their own engines — at a cost of hundreds of millions of dollars annually.

The leading F1 teams are constantly developing their machinery in order to eke out the extra split-seconds that will edge them ahead of their rivals. Big name brands such as Red Bull and Mercedes are willing to foot the bill because F1 is the world’s most watched annual sporting event and puts their brands in front of half a billion people worldwide.

As a result, the biggest spending F1 team Ferrari will run on an estimated budget of $470 million in 2013. This is more than 30 times the estimated $15 million budget of the leading IndyCar teams such as Ganassi and Andretti Autosport. The figures — supplied by Formula Money — below explain how the money is spent.

TOTAL BUDGET
Top F1 team: $470 million; Top IndyCar team: $15 million

This includes the following key areas of spending:

THE CAR
Top F1 team: $125 million; Top IndyCar team: $3 million

The largest single cost for most F1 teams is the design, development and construction of a bespoke chassis. F1 teams must construct their own chassis and although the manufacturing costs of an F1 car are a relatively small $15 million per year, top teams can spend well over $100 million on research and development.

All IndyCar teams must buy their chassis from series provider Dallara. The price is $345,000 per chassis, but the purchase of aerodynamic packages designed for different circuits can add another $150,000-$200,000. A team typically gets through three chassis per driver each year.

THE ENGINES
Top F1 team: $130 million; Top IndyCar team: $2 million

F1 manufacturers such as Ferrari and Mercedes spend more than $100 million annually on engine development. This is principally to supply their own teams, but they are required to also supply other teams with engines and typically charge $13 million per season to do so.

Honda and Chevrolet typically charge IndyCar teams around $1 million per year per driver for an engine package which will allow the use of eight engines.

TESTING
Top F1 team: $15 million; Top IndyCar team: $1 million

Restrictions on F1 testing in recent years have seen budgets slashed from $35 million to $15 million annually in order to cut costs. This is still far larger than the IndyCar teams’ $1 million annual spending.

DRIVERS
Top F1 team: $47 million; Top IndyCar team: $3 million

Two times world champion Fernando Alonso is one of the highest paid sports stars in the world, receiving an annual salary of $40 million from Ferrari. In contrast leading IndyCar drivers receive $1-2 million per year. Unlike F1 drivers they also receive prize money – $2.5 million for Dario Franchitti when he won last year’s Indy 500 – but are usually expected to give at least half of this to their team.

ENTRY FEE
Top F1 team: $3.3 million; Top IndyCar team: $456,000

F1’s governing body, the FIA, operates a complex system for entry fees where each team is charged a basic fee of $500,000, plus $6,000 per point scored in the previous season for the constructors’ champion and $5,000 per point for everyone else. This has left 2012 champion Red Bull Racing with a bill of $3,260,000 this year. In contrast, IndyCar teams pay $12,000 per car per race.

HOSPITALITY
Top F1 team: $13 million; Top IndyCar team: $1 million

Hospitality may seem like a frivolous extra but it is a crucial part of how an F1 team operates. Sponsors spend up to $100 million annually so expect to receive silver service treatment when they visit a Grand Prix. A top F1 team can spend more on hospitality in a season than an IndyCar team spends on its entire budget. In contrast leading IndyCar teams may spend up to $200,000 at a showpiece event like the Indy 500, but far less at other races.

KEY SUPPLIES
Top F1 team: Free; Top IndyCar team: $1 million

One area where IndyCar costs far outstrip F1 is in the area of key supplies. Due to the high level of exposure F1 generates, many companies are keen to supply top level products free of charge in return for becoming an official partner of the team. Ferrari, for example, has sponsorship from a range of automotive companies including Shell (gas), SKF (bearings), NGK (spark plugs), Magneti Marelli (electronics) and Brembo (brakes). A typical top IndyCar team spends around $1 million a year on purchasing similar supplies.

OTHER
Top F1 team: $136.7 million; Top IndyCar team: $3.5 million

*Includes salaries, travel and factory costs.

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