But, for the fortunate few who make it as drivers in the NASCAR series, driving fast is not only a hobby, but also a profession. Being a NASCAR driver is merely a profession, despite the fact that it may sound like an exciting way to make a career.
How does NASCAR turn a collection of fast-moving automobiles into payments for the drivers and teams? This topic used to be much simpler to answer, as it encompassed ticket sales, merchandise, endorsements, and sponsorships, as well as prize money — the purse money at each race. In February of 2016, however, NASCAR executives and team owners unveiled the owner charter system, a long-term arrangement.
In this post, we will discuss the charter system, how NASCAR drivers and teams are currently compensated (as much as we can), and who receives the largest part of profits under the new system.
NASCAR Purse Money
From 1948 to 2015, the stock car racing series included the “purse” in the race box scores. The drivers would negotiate contracts with team owners for a wage and a percentage of the weekly purse. The purses relied on the size and significance of the race; large tracks offered more rewards than smaller tracks.
Anyone interested could quickly determine how much money was being given out for the race that weekend. You could even determine how much the winner of the race would have deposited into his bank account.
In 2015, the last year before the charter system was implemented, these numbers were substantial. Denny Hamlin got $166,760 for winning the STP 500 at Martinsville in 2015. Yet when Joey Logano won that year’s Daytona 500, he received a staggering $1,586,503. That is by far the largest purse of any race held in the year. Jimmie Johnson got $523,501 for his victory at the Texas Motor Speedway, which was less than a third of the amount awarded in Daytona.
With the new charter system, however, driver compensation has changed. Continue reading to discover how things operate now.
The Charter System Explained
The new charter system restructured how drivers are compensated by establishing 36 ownership charters in NASCAR. These teams have consistent sponsors and drivers, as well as consistent racing results. According to Autoweek, the 36 ownership charter teams receive shared NASCAR Cup Series benefits, such as a guaranteed starting place in each race. There are also four open clubs without guaranteed revenue in the system. These slots are available to up-and-coming Sprint Cup teams.
But each charter has a unique worth. Their value is determined by factors such as the historic significance of the team and the car’s performance across multiple seasons. The compensation for chartered teams is based on guaranteed revenue, the team’s performance over the previous three seasons, a points fund with cash payments, and the race purse, which is always distributed according to a driver’s finishing position. Teams can sell or transfer their charters to another team. And NASCAR has the authority to cancel a team’s charter if it finishes in the bottom three of the 36 charter teams for three consecutive years.
Although claiming its new finance system would be transparent, NASCAR will not disclose how prize money is distributed, not even to some drivers. With this method, the money is awarded to teams, not drivers.
Then-NASCAR chief operations officer Brent Dewar told NBC Sports that they decided not to make each race’s total purse and individual winners public because “it’s not current” under the charter structure. In 2016, Dewar declared, “It’s a new beginning and a new age.” “This model is much different from its predecessor. This is one of the items from a different period and location.”
Prize Money Is Still Massive
While the recipients of the funds may have changed, the quantities have not changed significantly. Even if you have to dig to locate them, the purses at races are still enormous. We are aware that the payout for the season-ending 2021 Phoenix race was over $10 million, and that the 2021 Martinsville race paid out approximately $8 million to the field of teams.
Yet, handbags are smaller than they once were. In 2018, a bankruptcy petition by BK Racing provided additional insight into the money paid to teams at the bottom of the new structure. BK Racing has consistently placed in the bottom half of the field. At Daytona, the highest-paying race on the schedule, BK Racing won $428,794 for twenty-first place; nevertheless, the team never earned more than approximately $100,000 for any subsequent event.
Smaller teams may negotiate an arrangement with the driver in which the team receives the purse to help support the car and the driver receives a pay. Perhaps they may allow the driver to keep the purse in lieu of a pay, which could provide them the incentive to race more aggressively and achieve a better finish.
According to Autoweek, NASCAR and Racing Team Alliance (RTA) aimed to build a model that provided long-term benefit for team ownership by establishing the charter system. With bankruptcies such as that of BK Racing, teams had no assets other than their race shops, where products were sold for pennies on the dollar. This system is intended to assist in changing that.
Whether or if it is fair to the drivers remains to be seen.