IndyCar charter questions, answered: Investment, job opportunities, cost

IndyCar announced earlier this week that all 10 teams have officially signed its charter agreement, which provides a set of rules that teams must follow in order to be awarded guaranteed entry into every non-Indy 500 race.

But information about the charter is, at the moment, pretty opaque, which means plenty of motorsport fans have been stuck with unanswered questions regarding the new system. Today, we’re going to answer them.

Your IndyCar charter questions, answered

Why don’t chartered cars get guaranteed entries to the Indy 500?

Not to be too cheeky, but the answer to this question is: trauma.

American open-wheel racing’s history has been fractious, with multiple sanctioning bodies operating simultaneously and fighting over who has the right to compete at the Indianapolis 500. In 1996, the IRL decided that it had earned the right to mandate that its cars would be guaranteed 25 of the traditional 33 starting slots at the Indy 500, while the rival CART organization would be forced to compete for the remaining eight.

That resulted in a lot of bad blood among CART personnel, and lingering animosity that still exists today.

The initial charter proposal did include the Indy 500 as a race guaranteeing 25 starting slots to its chartered competitors. Media, team personnel, and fans balked at the idea, and teams adamantly rejected the proposal thanks in large part to that specific clause. People are still prickly about it.

The Indy 500 is arguably the series’ biggest value proposition, and I do anticipate there will be some concerns about chartered cars being “bumped” from the Indy 500 field if more than 33 drivers enter the event. It’s something IndyCar will have to learn to work around, and it could change in the future.

What does the charter system do for potential new automakers looking to enter the sport?

I’ve heard a few folks note that IndyCar should be less concerned about implementing charters and more concerned about encouraging a third engine manufacturer to enter the sport — but the problem is that there’s no reason for a third engine manufacturer to compete in IndyCar.

The series has somewhat stagnated; its chassis is 12 years old, its schedule relies on tried-and-true classics with little experimentation, and it only just introduced hybrid power units after years of delays. Those are not the signs of a healthy sport, and it does very little to encourage a third OEM to take the plunge.

While the charter system isn’t 100% guaranteed to rectify those problems, it does provide the series with legitimate incentives to improve its profile. Doing so brings value to the teams competing in the series, thus making IndyCar a more compelling business opportunity than it has been in the past.

That elusive third OEM is most likely looking for value in IndyCar but hasn’t found it. The charter system does, at the very least, establish a path forward for the series that could encourage an OEM to bet on the series’ much brighter future.

Has there been any indication that IndyCar will impose any limits on charter investment sources, like private equity firms or sovereign wealth funds, like they do with NFL or NBA franchises?

There’s currently no indication that IndyCar intends to ban private equity firms or sovereign wealth funds, but there could very well be a clause in the charter contract stating that. Worth noting, though, is that NASCAR has only just moved to ban investment from those aforementioned sources in its upcoming charter contract, eight years after the charter system was first introduced. This could always be introduced in IndyCar at a later date.

Is it possible for every team to have three guaranteed starters or are they capped at their current number per team?

There’s no cap on the current number of charters that a team has. Teams like Penske, Andretti, and Chip Ganassi Racing will have three charters coming into the 2025 season, but any one of those teams could choose to downsize to a two-car operation by selling off one of their charters. That means that a current two-charter team (such as Dale Coyne Racing or Juncos Hollinger) could buy any charter that goes on the market. It also means a brand-new team could step in to purchase a charter, or that a non-chartered team like Prema could purchase that charter. There are only two limitations on the charter system: Any team can only have a maximum of three charters, and there are only 25 charters to be distributed. Every team is free to buy, sell, or barter charters so long as they’re working with one of the existing 25 charters, and so long as they don’t try to add more than three charters to a team.

So can a charter grow to be worth more than the $1 mil, and can a team sell for more if they want? And each team has to pay for the $1 mil charter or do they just receive a grandfathered in charter for free?

Right now, we don’t know exactly how much a charter costs — but in initial charter negotiations, Penske Entertainment asked teams for $1 million to buy the charter. Teams refused this pay-to-play format, resulting in the decision to “grandfather in” charters to the teams that were active in 2023. Heading into 2025, no team needs to spend money on a charter. They receive that charter for free, after which it begins to accrue value. Any time a charter changes hands from here on out, though, it will cost money. The value of the charter will fluctuate depending on the perceived value of competing in IndyCar. For example, when NASCAR introduced its charter system in 2016, teams received charters for free, without having to pay. In 2021, a Cup Series charter sold for $13.5 million. Now, charters are expected to sell for between $20-30 million each. Does this possibly open up or reduce employment opportunities for future seasons at the teams? In the immediate aftermath of the charter deal, we’re likely to see some lay-offs — particularly at Chip Ganassi Racing. CGR ran five full-time cars in 2024, and it’ll have to pare back its lineup to just three chartered cars for 2025. The team doesn’t see value in fielding two non-chartered cars, so it’s going through a bit of a purge. Not every CGR employee is being fired; many are joining other teams, and many are slated to help found CGR’s Indy NXT operation. In the longer-term future, though, we can expect charters to attract more and better talent to teams, since the value of said team will continue growing. In three to five years, we can anticipate teams having enough additional funds courtesy of the charter to be able to hire talented individuals.

Dig deeper into IndyCar:

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How does a charter accrue value if it was given to teams for free?

Allow me to use an example to help illustrate my point. If I want to buy a plain white cotton t-shirt, I can get one from Hanes for $7. I can also buy a plain white cotton t-shirt from Prada for $925.

At the very basic level of the product being offered, there’s no way the Prada product actually needs to be $900 more expensive than the Hanes shirt. They’re functionally the exact same thing (with perhaps some teeny Prada flourishes).

So why do people pay $900 for a Prada shirt when they could just as easily buy a $7 Hanes shirt? Perceived value .

When you buy a Hanes shirt, you’re just buying a shirt. But when you buy the Prada shirt, you’re effectively buying access into a very exclusive club of wealthy, elite people who can afford spending a lavish amount of money on a wardrobe essential.

The value of IndyCar charters will also be a perceived value. Investors and/or other teams will effectively decide  that competing in the series is worth a certain amount of money that will evolve as the sport grows in profile.

I talked about the NASCR charter system above; charters were also grandfathered in in the Cup Series, but they’re now estimated to be worth upwards of $20 million, simply because the act of competing in NASCAR is deemed to be worth that much.

Why doesn’t Prema get a charter? If Prema doesn’t need a charter to race, why does anyone need a charter?

A lot of folks have gotten tripped up in the Prema situation, so let me break it down. Prema will not have any charters for its two-car team coming into 2025, but Prema is still able to enter and potentially start races.

To explain why, let’s take a look at the current IndyCar grid. Non-Indy 500 races are drawing impressive fields of 28 or more cars, but the series is beginning to realize that it’s growing too big for its britches in a sense. Tracks like Detroit feel very crowded with 28 cars on track, and smaller oval circuits often have limited space available in the pit lane.

As a result, IndyCar has decided that it intends to cap its entries per race at 27 coming into 2025. The 25 chartered cars are all guaranteed to start. If five additional non-chartered cars enter the race, though, those five will have to fight for the final two slots on the grid.

For 2025, IndyCar is only expecting 27 cars to enter each race: The 25 chartered cars, plus Prema’s two non-chartered cars. So, Prema will not have to have a charter to race this coming season.

That being said, Prema would still benefit from purchasing a charter or two in the future. Why? Because IndyCar is anticipating that its series will grow more prestigious with the introduction of the charters, which means it believes more teams will attempt to join the field (or that existing teams will run one-off non-chartered cars to test out future talent). Further, IndyCar also anticipates other potential changes to grid capacity, thus meaning that in the future, Prema may need to have one of the 25 chartered entries in order to race.

IndyCar introduced 25 charters and a 27-car entry list in part because it didn’t want to discourage Prema from entering the series, but these numbers are only relevant until 2031, when the series will have to re-negotiate its charter agreement.

Finally, Prema didn’t receive charters because it is wasn’t competing in IndyCar in 2023. The finishing order of 2023 determined what cars received charters in 2025 as a way to reward ongoing participation in the sport.

Will the charter system discourage new teams from entering the sport?

If there’s no guarantee that your car will be able to enter a race, then it’s likely that potential new teams may balk at the idea of entering a non-chartered car. And if it costs several million dollars to purchase a charter in order to guarantee entry, then it’s likely that potential new teams will balk at spending the money.

But take a good hard look at IndyCar and ask yourself how many new teams we’ve seen scrambling to enter the series. Prema is a wonderful exception. Prior to that, we gained Juncos, but only because it bought out the remains of Carlin.

Yes, the charter agreement will likely discourage some teams from entering the sport — but those teams weren’t doing so, anyway.

Did the charter system help NASCAR when it was introduced?

The NASCAR Cup Series charter system was introduced back in 2016, and folks have been fighting about it ever since — particularly this year, as charter negotiations have grown contentious.

Obviously, there are certain drawbacks. The introduction of the charter system weeded out a lot of backmarker teams and also created a high price point as a barrier to entry. However, now the cars that do turn up to a race are considered “quality” entries — ones that are better funded and better organized.

However, the teams that do have charters have seen some significant investment, which has allowed them to make high-profile hires and secure high-profile sponsorship contracts.

And NASCAR as a whole has been encouraged to expand in order to continue providing its teams with value. Since the introduction of the charter agreement, NASCAR has introduced a more user-friendly Next Generation car, its first-ever street race in Chicago, an international race in Mexico City, and more. It has also encouraged international talent like Jenson Button, Daniil Kvyat, Juan Pablo Montoya, and Shane van Gisbergen to enter the series.

IndyCar’s charter system is somewhat different from NASCAR’s, so it’s harder to speculate on how IndyCar will fare — but NASCAR did provide a promising baseline.

When will we see the impact of the charter system?

We’re already seeing it! The day after the charter system was announced, Ed Carpenter Racing also announced that it had signed Splenda sweeteners and Java House coffee additives as sponsors for the two-car team.

Ted Gelov, owner of those two brands, is now a co-owner of ECR — thanks to the charter. RACER reports that the sponsorship package is in the range of around $40 million, and Gelov was willing to take that leap because the charter system promised to provide inherent value to the team outside of its physical assets.

We’ll likely see similar kinds of immediate impacts in the form of sponsorships over the next two years, while we can expect to see longer-term impacts in the 3-5 year range.

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