How much would it cost to own a Formula One team?
Have you ever wondered how much would it cost to buy and own a Formula One team? The obvious answer is a lot of money. Even if you are a really wealthy person, the challenge will be not only in a very costly acquisition, but also in maintaining annual upkeep that can become very expensive. However, there are other important factors involved, for example what kind of weight does your team have with the Formula One Management team, and what is your team’s average annual performance score when it comes to getting your share of spoils. Looking at some numbers related to the most extravagant car racing event on the planet might help us with the math.
Traditionally, the finances of Formula One are very closely held, so firm figures are hard to come by. Estimates suggest that the top teams spend in the range of $250-300 million annually. To provide context, a few years ago Toyota was rumored to be spending as much as $600 million per season. In 2016, Ferrari were the biggest spenders in Formula One, overtaking Mercedes. However, a study of expenditure by all the teams also reveals that the smaller outfits spend far more than the grandee teams for the each point they score - with Manor’s solitary point costing them an astonishing $123 million, while Mercedes bagged each of their points for about half a million of dollars per point.
Ferrari pumped $473 million into their 2016 campaign, but all that money was not enough to earn a single victory in the 21 race season. The Maranello outfit finished third in the constructors’ championship, scoring 398 points in the process, each point costing them a $1,2 million. In contrast, Mercedes spent $380 million on their season and won 19 races. The Silver Arrows scored 765 points during the course of the season, at $497,000 per point, half of what it cost Ferrari. In the end, it was the most cost effective campaign performance by any team in 2016. Red Bull emerged as Mercedes’ biggest challenge, with the energy drinks outfit spending approximately $309 million in one season. McLaren were the fourth biggest spenders, with a budget of $266 million committed to their campaign, while Force India tackled the 2016 season campaign with a relatively modest $127 million.
However, the system of financial asset distribution that F1 applies is less than fair. For example, in 2017 Ferrari received $180m, representing almost one fifth of the total ‘pot’ but $12 million less than last year. That’s $108 million more than Force India receives, despite the latter finishing just one place adrift in the constructors' championship. Mercedes won both the drivers’ and constructors’ championships for the third successive year, but still received $9 million less than Ferrari. Force India and Williams both finished ahead of McLaren in the standings, but each receive less courtesy of McLaren's CCB payment. If the pot was shared out equally, each team would get $94 million. That would leave Ferrari's payment down by $86 million while Sauber, the final team to qualify for Column 1 and 2 payments, would receive an extra $45 million.
The budget each team has obviously varies massively and also the manner in which they choose to spend it also differs. But working on the average, according to Formula Money’s figures, $63 million is spent on research and development: $25m of that on wind tunnel testing, $15m on track testing, and the remainder on Research and Development. Another big spend is on production, estimated on average for a typical team at $57m: a third of that on manufacturing, $28m on a custom engine supply (admittedly not applicable to every single team) and the remainder on other key components such as gearboxes, tyres and electronics.
Because of the cash windfall and the championship’s popularity, Formula One has produced a constellation of wealthy drivers, but even in their case, that can vary monstrously. For example, a list of highest paid F1 elite drivers includes Jenson Button (net worth $105m), Eddie Irvine (net worth $180m), Alain Prost (net worth $185m), and Kimi Raikkonen (net worth $200m). Even the series' lowest-paid driver, Sauber’s Pascal Wehrlein, still makes $150,000 in 2017. Meanwhile, McLaren's Fernando Alonso will make a whopping $40 million, making him Formula One’s highest paid driver.
Lotus boss Gerard Lopez argued, though, that things need to change in the manner in which money in the sport is spent. “The distribution model of revenues is completely wrong”, he said. “The ones that have more, get more and as a result want more and want to spend more and so on, and the ones that have less, get less”. Overall, it is safe to conclude that the TV money and all the advertising dollars it brings has redrawn the financial landscape of Formula One. In 1975-76, the other teams were up in arms because Ferrari was supposedly spending the then-unimaginable, and now very laughable sum of $20-25 million per season. So if you have about half a billion dollars in idle cash, you might want to consider one of F1 teams to satisfy your heart's desire.
A list of twelve most expensive teams of F1 championship starts with Team Ferrari of the Fiat group, which is worth $1.15 billion.
Team McLaren comes second worth $800 million.
Group Red Bull is worth $400 million and comes third.
Daimler's Mercedes team is worth $390 million and is number four.
Sir Frank Williams team is fifth and worth $290 million.
Team Lotus of Genii Capital is number six and worth $270 million.
Force India is the seventh with $225 million.
Team Sauber comes eighth worth $155 million.
Number nine is team Toro Rosso worth $135 million.
Red Bull Caterham is number ten with $105 million.
Team Marussia comes eleventh with $75 million.
Team Hispania of Thesan Capital is number twelve, worth $50 million.