F1 cost cap: What is it and how does it work?

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f1-cost-cap:-what-is-it-and-how-does-it-work? — F1 cost cap: What is it and how does it work?

The Formula 1 cost cap has made the news again as the championship’s governing body the FIA released its findings for the 2024 season.

It stated that all teams, plus power unit manufacturers, had met the cap but Aston Martin had committed a “procedural breach” regarding the paperwork.

But there has been a previous instance in which a team has breached it and received a punishment for doing so. So, here is all to know about the F1 cost cap.

Why does F1 have a cost cap?

Some teams used to have enormous budgets, while others make do with relatively modest amounts of money. This used to correlate to performance on the circuit, and made it almost impossible for ‘poorer’ teams to catch up and compete.

Charles Leclerc, Ferrari, Lewis Hamilton, Ferrari, Lando Norris, McLaren, Max Verstappen, Red Bull Racing

Photo by: Daniel Cardenas / Anadolu via Getty Images

The cost cap was primarily a long-overdue attempt to level the playing field, but also to ensure enough teams survive to make up a grid. From struggling to keep the lights on, a lot of teams have since started breaking even or even making money, while they have seen their values skyrocket as the have become valuable franchises. After a stake sale in September 2025, McLaren was valued at $4.1 billion, a huge increase over the pre-cost cap era.

What comes under the F1 cost cap?

Any expenditure related to car – but not engines – performance is relevant for the cost cap. This 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

The biggest area of focus is car development costs, with teams having to weigh up what is developed, how much is spent on each part which is manufactured and how many of the parts are needed and can be afforded without overspending.

What doesn’t come under the F1 cost cap?

There are several big-ticket things that aren’t covered by the cost cap, including:

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

For 2026 and beyond, the cost cap will be increased from $135m to $215m, but rather than presenting a net increase in what teams are able to spend, the move means a lot more items that were previously exempt will now be included.

From next year onwards, Swiss-based Sauber will also receive a cost cap offset based on OECD salary data, to account for higher wages and cost of living in Switzerland compared to the United Kingdom and Italy, where the remaining teams are based.

From 2023, F1’s power unit manufacturers have also been subject to a cost cap to keep the cost of engine development under control.

What are the penalties for breaching the F1 cost cap?

Lando Norris, McLaren, Max Verstappen, Red Bull Racing

Photo by: Sam Bloxham / LAT Images via Getty Images

Beyond procedural misdemeanours to do with reporting, there’s a clear line in the sand regarding cost cap transgressions: exceeding the set amount by 5%. Beneath that figure, it’s officially defined as a ‘minor overspend’.

Go above it, and teams are in ‘material overspend’ territory. But the sand on either side of the line is pretty blurry in terms of what penalties might apply. Spending is a complex area to regulate once you get into the details, so the rules have deliberately been written to allow for case-by-case punishments.

As such, the wide range of possible penalties that can be given is similar for both minor and major rule breakages: Points deductions, exclusion from races, fines and windtunnel testing limitations.

But there’s one key difference if you’ve overspent by more than 5%: you can be kicked out of an entire world championship.

What happens when an F1 team breaches the cost cap?

F1’s files will be studied by a Cost Cap Administration, which undertakes a very thorough review of the teams’ reporting documentation and then awards the with a certificate if successful. Because of the huge amount of complexity of F1’s financial regulations and teams’ accounting efforts to eke out every dollar without breaching the regulations, that process can be very time consuming, as was the case for 2024.

As per the FIA’s regulations: “The CCA has several options available to it when dealing with an alleged breach of the Financial Regulations.

Lance Stroll, Aston Martin Racing, Fernando Alonso, Aston Martin Racing

Photo by: Sam Bagnall / Sutton Images via Getty Images

“It can enter, when deemed appropriate, into a settlement referred to as an Accepted Breach Agreement with the F1 Team or PU Manufacturer concerned in case of a Procedural Breach or Minor Overspend Breach, or, if no agreement can be reached or the CCA considers it more appropriate, it can refer the case to the Cost Cap Adjudication Panel. In the event of an alleged Major Overspend Breach, the CCA must refer the case to the Cost Cap Adjudication Panel.

“The Cost Cap Adjudication Panel comprises a panel of 12 judges elected by the FIA General Assembly…from the candidates proposed by either the FIA Sport Member Associations entitled to vote, or a group of not less than five F1 Teams, or a group of not less than three PU Manufacturers.”

Which F1 teams have breached the cost cap?

There has only been one previous occasion in which an F1 team has failed to meet the cost cap altogether and that was Red Bull in 2021, as it overspent by 5%. Red Bull was therefore fined $7m and received a 10% reduction in wind tunnel and CFD testing.

More recently, Aston Martin was found in “procedural breach” of the 2024 cast cap because its paperwork was signed off too late. The team didn’t breach the actual cap itself, so it was slapped with a small administrative fee rather than a penalty.

On the power unit front, the two parties to commit a procedural breach were Renault and Honda in 2023, which both settled for an ABA as part of the power unit cost cap filings. For 2024, all of F1’s power unit suppliers – Mercedes, Ferrari, Honda, Renault and Audi – were found to be in compliance.