The FIA’s delayed inquiry found Red Bull guilty of breaking F1’s financial regulations with a “minor” overspend, while Aston Martin and Williams were deemed to be in procedural breach. 

But what exactly is the cost cap? How does it work? And how will it change in the future? 

What is the F1 cost cap and why was it introduced?

F1 introduced the first-ever set of financial regulations for 2021 in a bid to encourage a more competitive championship. 

The hope was that by enforcing a limit on spending, F1 would help level the playing field more by enabling smaller teams with less resources to compete in an even environment against teams boasting huge budgets. 

Some teams were previously known to be spending upwards of $400m per season. 

The other main goal behind the implementation of the budget cap was to ensure a financially-sustainable sport. 

The cap works by limiting the amount of money an F1 team can spend over the course of a calendar year to avoid spiralling costs. 

Any team found guilty of overspending will face a penalty.   

How much is the cost cap? 

Originally, the 2021 budget cap was to be set at $175m, but that was cut down to $145m to help teams struggling as a result of the COVID-19 pandemic, which placed greater emphasis on the need for F1 to slash costs. 

The cap was reduced to $140m for 2022, with plans to further cut the limit down to $135m for the F1 2023 season until 2025.

These figures are based on a 21-race season and will be adjusted accordingly, with an extra $1.2m allowance for each race over that threshold. The F1 2023 calendar has revealed a 24-race season.

In July, the FIA agreed to a 3.1 percent raise for the 2022 cost cap due to the impact soaring inflation was having on the teams’ budgets. 

What is included under the cost cap? 

Expenditure that falls under the cost cap includes: 

  • All parts on the car (from the steering wheel to the wheel nuts)
  • All the elements needed to run the car
  • Most of the team personnel
  • Garage equipment
  • Spares
  • Transport costs
  • Everything in between

What isn’t included under the cost cap?

Expenditure that does not fall under the cost cap includes:

  • F1 driver salaries
  • The wages of the three highest-paid staff members
  • Travel costs
  • Marketing spend
  • Property and legal costs
  • Entry and licence fees
  • Any non-F1 or road car activities
  • Parental and sick leave payments
  • Employee bonuses and staff medical benefits

How can the teams save money? 

Teams have already been forced to cut back on staffing levels in order to make savings. 

Christian Horner revealed Red Bull have had to make over 90 people redundant, while Mercedes have laid off 40 members of staff. 

Teams also have to factor in potential accident damage. 

One of the most effective cost-saving measures is to cut back on development and reduce manufacturing time, something that will hit the big teams the hardest. 

Lewis Hamilton recently claimed that he would have won the 2021 world title if Mercedes had spent an extra $300,000 on upgrades such as “a new floor or an adapted wing”.