Gentlemen, start your engines — of your money-munching machines.
While waiting for the flag to drop at the Indianapolis 500 this Memorial Day weekend, are you fantasizing about becoming a race car driver? You may have the driving skills, but you also need sponsors, a support team, and most importantly, money. Lots and lots of money. Monster truckloads of money.
Spending varies greatly by types of racing as well as with individual teams, as open-wheel racing (Formula 1 or IndyCar), NASCAR Sprint Cup, and lower levels all have their own peculiar economic structure. Racing teams do not often reveal their costs or open their books for competitive reasons, but a few reporters have taken a peek under the hood.
Michael Ballaban of Jalopnik.com was allowed access to the finances of one racing team competing in the 2015 Tudor (now WeatherTech) SportsCar Championship, and concluded that an average race team probably costs around $1 million per year, "give or take a couple hundred thousand." Should a car be totaled during the season, add another $400,000 to that sum for a full replacement. It’s not easy for racing teams to get cheap auto insurance.
U.S. & World
Major components cost tens of thousands of dollars, including engines and gearboxes at around $43,000 each, and the chassis/brake assembly at $65,500. You may think fuel is a huge expense, and it is significant at around $40,000-$50,000 per year, but it pales in comparison to tire costs: a season of racing tires (around 90 full sets) run teams around $225,000 per year. That's nearly a quarter-mill on tires only. So the next time you get a flat, don't complain.
Another large cost that can be overlooked by outsiders is entry fees. Ballaban estimated a bit over $100,000 in entry fees for the year. Simple things jack up the costs as well. Items like plane tickets, hotel rooms, and food for your team plus shipping logistics for your car and accessories can approach $10,000 per race.
Want to race in NASCAR? Get ready to pony up. A 2014 article from Street & Smith's SportsBusiness Journal covered the finances of the Stewart-Haas (Tony Stewart and Gene Haas) racing team and found competition costs for a race at more than $1.4 million. That included the costs of the cars, which should last for more than one competition, but sometimes don't. The vehicles totaled $980,000, given the need to maintain primary and backup cars for each race. Each primary car cost approximately $200,000, with engine costs at roughly half of that total, and a chassis at $25,000.
The team budgets $400,000 for firesuits for the year, but that didn't include the cost of dry cleaning: $2,400 per race. Even the ice bill for the weekend totaled $900. Don't forget to add team expenses that topped $125,000: flights and 44 hotel rooms took up over $82,000; transport for the cars, rental cars for the crew and support team, and other auxiliary transportation costs surpassed $30,000. The haulers that transport the car cost approximately $400,000 each and are replaced every five years.
The cost of a NASCAR team through the season appears to be in the eight-digit range. An older Florida Times-Union report suggested that the costs approach $400,000 per week — if true, for a 38-week season, that is over $15 million in annual expenses.
If you think that is chicken feed, perhaps Formula 1 racing is more your speed. Last year, Gene Haas of Stewart-Haas joined Formula 1 with two cars and spent a total of €117 million ($128 million), according to The News Wheel. That's just a fraction of the €386 million ($422 million) rung up by the top-spending Ferrari team. Gas 2 estimated in 2016 that an IndyCar cost roughly $3 million, including its chassis, transmission, brakes, engine, and tires, which are usually all mass-produced; a Formula 1 car's custom-built components drive the car's cost over $200 million. ESPN supports that IndyCar price, estimating a range of $3 million to $8 million per car, depending on the team.
You need pretty good credit to get an auto loan for $3 million.
A well-heeled sponsor is necessary in the upper levels of racing not to thrive, but just to survive. Prize money alone can't possibly pay the bills, and aside from the lowest local levels of racing, it is virtually impossible to be independent and field a racing team.
But sponsors don't always get their money's worth. Danica Patrick, the only woman ever to win an IndyCar Series race, recently agreed to compete in two NASCAR races in a car and racesuit promoting the movie "Wonder Woman." It was a marketing match made in heaven. But one horrific crash later, and the car was totaled in its debut. So, if the Indy 500 puts me in the mood to put the pedal to the metal, I'm going to grab a roll of quarters and head to Chuck E. Cheese.
This article was provided by our partners at MoneyTips.com. Read more from MoneyTips:
Auto Leasing 101
Was your Identity Stolen? Check your Credit Report for Free
What A Car Thief Can Teach You
Optimize Your Debt And Lower Your Interest Payments