The hidden economics of IndyCar: The costs of going 230 mph

Credit: WikiMedia Commons

It’s marketed as the affordable alternative to Formula 1. The team owners footing the bill would respectfully disagree.

On the last Sunday of May 2025, a 28-year-old Spaniard named Álex Palou drove around a 2.5-mile oval in Indiana 200 times and walked away with a check for $3.83 million. That was his slice of a $20,283,000 prize pool — the largest total purse in the 114-year history of the Indianapolis 500, and the fourth consecutive year the race had set a new record. To most fans watching on Fox, those numbers tell a simple story: motorsport is glamorous, motorsport is lucrative, and the people inside those cars are getting rich.

Peel back the carbon fiber, though, and the financial picture gets stranger — and much grimmer for nearly everyone involved. While Palou was banking what amounted to roughly $19,000 per lap, the team owners standing next to him in Victory Lane were doing different math. The kind of math that ends with one of them telling a reporter, on the record, that the cost of fielding a single car had become “ridiculous.”

Welcome to IndyCar, perhaps the strangest economic puzzle in professional sports. It’s a championship marketed as the affordable, all-American answer to Formula 1, where every team runs the same chassis and the same set of engine options, and where a midfield car can still win the biggest race on the calendar. It is also, simultaneously, a series where the cost of competing has climbed roughly 40% in two years, where most teams lose money on most weekends, and where one driver recently admitted on a podcast that he had “no idea” how he was going to raise the $10 million his team needed just to put him in the car.

How did a series built explicitly around cost control end up here? The answer involves hybrid powertrains, a 13-year-old chassis, the peculiar economics of being the second-most-popular form of open-wheel racing on Earth, and an 89-year-old billionaire named Roger Penske who happens to own both the league and one of the teams competing in it.

A spec series, in theory

To understand why IndyCar is expensive, you first have to understand why it was supposed to be cheap. The series is what’s called a “spec” championship. Every car on the grid is built on the same Dallara chassis — the DW12, formally the IR-12, named in honor of driver Dan Wheldon, who was killed at Las Vegas in 2011. It entered service in 2012 and, after two aerodynamic facelifts and the addition of an aeroscreen and a hybrid system, will now soldier on until at least 2028, when it’s set to be replaced by the new IR-28. Engines come from one of two suppliers, Chevrolet or Honda — both 2.2-liter twin-turbo V6 units leased to teams under tight technical regulations. Tires are supplied exclusively by Firestone, which handles all compound development centrally so that no team can buy an advantage with private testing.

This is, on paper, the opposite of Formula 1. In F1, the cars themselves are the differentiator: Red Bull and Ferrari spend hundreds of millions designing chassis that other teams literally cannot legally copy. A Mercedes power unit is not a Honda power unit, and the gap shows up on the stopwatch. In IndyCar, by contrast, the cars are functionally identical. The differentiator is supposed to be the driver, the engineers, and the pit crew — not the size of the checkbook.

And for a while, it more or less worked. Through the late 2010s, a competitive IndyCar entry could be fielded for somewhere between $3 million and $6 million per car per season. That’s not nothing, but it’s not Formula 1 either: a 2024 F1 team operated under a cost cap of around $135 million for its entire two-car operation, and the top teams routinely found ways to spend hundreds of millions more on items the cap didn’t cover. IndyCar was, by an order of magnitude, the bargain. Then 2024 happened.

The hybrid that broke the budget

Halfway through the 2024 season, IndyCar introduced a hybrid power unit. Unlike the lithium-ion batteries you’d find in a Prius or a Formula 1 car, IndyCar’s system uses a bank of 20 supercapacitors — capable of fully charging or discharging in about 4.5 seconds — paired with a motor-generator unit tucked into the bell housing between the engine and gearbox. The system captures kinetic energy that would otherwise be lost during braking, stores it, and redeploys it as a 60-horsepower boost. Formula 1, for what it’s worth, has run hybrid power units since 2014. IndyCar got there a decade later.

Hybridization was meant to modernize the series and signal to manufacturers that IndyCar was a serious place to develop electrified performance technology. What it actually did, in the short term, was detonate every team’s budget. Three of the five IndyCar team owners interviewed by RACER magazine reported that their costs jumped between 20% and 25% in 2024 alone. Meyer Shank Racing co-owner Mike Shank put his team’s increase at more than 40%, calling it “beyond” what was sustainable. “We cannot keep doing that,” he told the publication. “And IndyCar knows that.”

Today, fielding a single IndyCar for a full 17-race season costs somewhere between $8 million and $10 million for a mid-pack team. The wealthier outfits — the Penskes, the Ganassis, the Andrettis — spend $13 million or more per car. Engine leases alone run more than $1.5 million per car per year, before you’ve paid a single mechanic or bought a single tire. (The tires, by the way, run about $100,000 a month.)

And here’s the part that should make any reasonable investor pause: almost none of that gets recouped through prize money.

The prize money mirage

This is where IndyCar’s economic model starts to look genuinely peculiar. Outside the Indianapolis 500, race winners take home only about $30,000. That’s the gross figure — before the team’s cut, before the IRS, before anything. For comparison, the winner of NASCAR’s Daytona 500 typically pulls in well over $1 million, and recent reporting suggests the figure now sits closer to $2 million. A driver who wins an IndyCar street race in Long Beach earns less, in pure prize money, than a mid-tier doctor makes in a month.

To soften the blow, the series operates what’s called the Leaders Circle program. The top 22 full-time entries in the championship each receive roughly $1.2 million per car as a base payment for participating in the series. After teams complained loudly about the 2024 cost spike, Penske Entertainment quietly injected an extra $2.2 million into the program, bumping each entry’s payout by another $100,000.

Run the numbers, though, and the gap is striking. A team spending $9 million to field one car will, in a good year, receive around $1.2 million from the Leaders Circle and another few hundred thousand in scattered race prize money. Unless they win the Indy 500 — where third-place finisher Pato O’Ward earned $951,000 in a single afternoon in 2025 — the prize-money side of the ledger barely covers the cost of engine leases.

So how do teams survive? The same way IndyCar teams have survived for decades: sponsors. Every dollar that doesn’t come from prize money has to come from a logo on the sidepod, a name on the wing, or a brand on the driver’s fire suit. And in the post-pandemic, post-streaming-boom media landscape, those logos have gotten much harder to sell.

The Conor Daly problem

If you want to understand what this all feels like from inside the cockpit, consider the case of Conor Daly. Daly is a 34-year-old American driver who has bounced around IndyCar for more than a decade. In late 2024, just after turning 33, he signed a full-time deal with Juncos Hollinger Racing, a midfield team that needed to raise about $10 million to put him in the car for 2025. Speaking on the “Off Track with Hinch and Rossi” podcast, Daly described the experience with rare candor: “I have no idea how I’m gonna do that. Like, zero. I have not, not a clue. And I actually still don’t know how that’s going to happen.”

This is, increasingly, what being a professional IndyCar driver looks like. Outside the top three or four teams, most drivers are expected to bring sponsorship money with them — sometimes a few hundred thousand dollars, sometimes the entire $10 million. The result is a driver market that doesn’t always reward the fastest hands. It rewards the fastest hands attached to the best Rolodex.

Even at the top end, the economics have shifted. Driver salaries, which used to top out around $1.5 million for established stars, have climbed dramatically in the past two years. Top drivers now command $3 million to $7 million per year, with the most marketable names — Palou, Josef Newgarden, O’Ward — almost certainly higher. That money comes out of the same budget that has to pay for engines, tires, transporters, and the small army of engineers it takes to run a modern racing operation.

Why the Indy 500 distorts everything

Hovering over all of this, of course, is the Indianapolis 500. The race is to IndyCar what Wimbledon is to tennis: a single event so disproportionately large that it shapes the economics of everything around it. The 2025 purse of $20.28 million was actually smaller than NASCAR’s Daytona 500 purse of $30.33 million that year — but the Indy 500’s winner-takes-most structure meant Palou pocketed $3.83 million, comfortably more than the estimated $2.4-to-$3 million the Daytona 500 winner received. (Curiously, Palou’s check was still slightly less than the $4.288 million Josef Newgarden took home a year earlier, thanks to a $440,000 BorgWarner bonus Newgarden picked up for winning back-to-back.) The average payout per driver at Indianapolis in 2025 was $596,500. Even Robert Shwartzman, the rookie who took pole position for PREMA Racing in their first-ever IndyCar season, walked away with $327,300.

For one race a year, IndyCar economics look spectacular. The 2025 Indy 500 on Fox averaged 7.05 million viewers, the most-watched running of the race in 17 years — since Scott Dixon’s 2008 win drew 7.245 million on ABC. The race even outdrew the Daytona 500, only the third time that has happened in three decades. Sponsorship inventory for that one weekend in May routinely sells at multiples of what teams can charge for the entire rest of the season combined.

This creates a curious incentive structure. Teams build their entire year around the Indy 500. Smaller teams that can’t afford a full-season program often field one-off “500-only” entries, hiring veteran drivers and spending what they have on a single shot at glory. In 2025, the field at Indianapolis swelled to 34 cars attempting to qualify for 33 spots — a healthy number in a series whose regular weekly grid is 27 cars.

But you can’t run a championship on one race. Which brings us back to the central tension: the Indy 500 generates enough money to make IndyCar feel like a major sport for one Sunday in May, and the other 16 weekends feel like a budget crisis in slow motion.

The Penske paradox

There’s one more wrinkle, and it’s a big one. Since 2020, IndyCar has been owned by Roger Penske, the 89-year-old billionaire who also owns the Indianapolis Motor Speedway and Team Penske, which fields its own three-car IndyCar program. In other words: the man who sets the rules, runs the league, owns the venue, and signs off on the Leaders Circle program also competes in the championship he governs.

On paper, this is a governance nightmare. In practice, it has mostly worked. Penske has invested heavily in the sport since taking over, expanding the schedule, signing a long-term deal that moved all 17 races to Fox in 2025, and pushing the Indy 500 purse to record highs in four consecutive years. The 2025 season — Fox’s first — averaged 1.36 million viewers per race across all 17 events, a 27% increase over 2024 and IndyCar’s best year for television viewership since 2012. The arrival of PREMA Racing as the series’ 11th full-time team — its first European entrant in years — suggests IndyCar is attracting genuine international interest for the first time in a long while.

But Penske’s dual role also creates obvious tensions. When team owners complain that the hybrid retrofit was too expensive, they are complaining to a man whose own team had to absorb the same costs. When the series quietly delayed its next-generation chassis from 2027 to 2028, citing development costs in the $25-to-$30 million range, it did so under the supervision of an owner who has every incentive to protect his teams from another budget shock — and every incentive, simultaneously, to keep his own team’s competitive advantages intact.

So who actually makes money?

If you’ve followed the math this far, you’ve probably arrived at the same question I did: where, exactly, is the money in IndyCar? The drivers, mostly, are doing fine — at least the established ones. Palou’s $3.83 million Indy 500 check, on top of an annual salary that almost certainly exceeds $5 million, makes him one of the highest-paid open-wheel racers outside Formula 1. Top mechanics and engineers, increasingly poached between teams in a war for talent, are seeing real wage growth too.

The team owners are, by their own admission, mostly not making money. Several of the smaller operations are believed to operate at or near breakeven in good years, and at a meaningful loss in bad ones. The wealthier teams — Penske, Ganassi, Andretti — can absorb losses on the racing side because the operations function as marketing platforms for their owners’ broader business interests, or because they’re simply willing to bleed cash for the love of the sport.

The series itself, under Penske Entertainment, is reportedly more financially healthy than it has been in years. The Fox deal, the climbing Indy 500 purse, and the resurgent television numbers all point in a positive direction. And Firestone, Dallara, Chevrolet, and Honda — the suppliers who form the structural backbone of the spec series — operate with relatively stable margins because their customers have no one else to buy from.

But the model has cracks. The 2027 “gap year” between chassis generations means teams will spend another season running 15-year-old equipment. Engine suppliers need at least 18 months from final regulations to engine production, which means delays compound. And every time costs go up, the pool of potential team owners and sponsors who can actually afford to play gets smaller.

The bargain that wasn’t

IndyCar, in the end, is an instructive case study in what happens when a sport tries to control costs through technical regulation alone. The spec chassis worked. The single-supplier tire program worked. The shared engine pool worked. What none of those measures could control was the underlying economic gravity of professional motorsport: the salaries, the logistics, the technology, the constant arms race in areas the rules don’t reach.

A modern IndyCar season requires 17 cross-country trips with a transporter that weighs more than a tour bus. It requires data engineers, performance engineers, race engineers, simulator engineers, and a pit crew that practices choreography the way Olympic relay teams practice handoffs. It requires marketing departments to chase sponsors who are themselves under pressure from boards asking whether motorsport sponsorship still moves the needle in an era of TikTok and targeted digital ads.

None of that is going to get cheaper. The hybrid system, for all the budget pain it caused, is here to stay — and the next chassis, whenever it finally arrives in 2028, will be more sophisticated still. The economic logic that pushed F1 to a cost cap is the same logic now squeezing IndyCar, just on a smaller scale and with fewer guardrails.

Whether the series can grow its way out of the squeeze — through better TV deals, bigger purses, deeper international audiences — is the open question that defines its next decade. For now, IndyCar remains a strange and somewhat beautiful contradiction: the most accessible elite motorsport on the planet, run by people who increasingly cannot afford to be there. The cars all look the same. The bank statements, very much, do not.