To properly grasp what’s in store for Team Penske’s Josef Newgarden as he explores free agency, we need to understand the seismic shift that’s recently occurred in the IndyCar driver marketplace, how it will influence Newgarden’s value, and whether he will be on the move to a new team in 2025.
The story starts with Colton Herta, who’s said to have signed a five-year deal with Andretti Global that pays a market-leading $7 million per season.
Other than to tell RACER, “That sounds like a great number,” Herta hasn’t been interested in discussing his personal finances since that sum started making the rounds last year in the IndyCar paddock, nor has his team owner felt compelled to reveal the amount he pays his drivers. But it’s a vitally important number to know.
It’s changed the financial dynamic in the IndyCar paddock in ways that we haven’t seen since the 1990s, and with a few more high-profile drivers like Newgarden up for bid entering 2025, Andretti’s big spending has radically altered the way elite IndyCar drivers are approaching the negotiating table.
And to be honest, it doesn’t really matter if that starry number of $7 million is real. What is important to know is that Herta’s alleged annual income has become accepted as fact by many of his rivals, and that $7 million revelation has weaponized all significant contract discussions since that number came to light.
His teammate Kyle Kirkwood received an extension last year that’s rumored to be worth $3.5 million and hew hire Marcus Ericsson is said to have negotiated something similar — in the $3 million range — to make Andretti Global the team with the highest average annual salaries in the series.
Herta’s huge-for-IndyCar deal is the new and leading dollar amount to seek, and that’s been a positive development for drivers. As recently as 2022, one IndyCar champion was being paid just $850,000, and for many of the best in the top half of the field, anywhere from $1.25-2.5 million was the well-established framework most teams were willing to work within for salaries.
In speaking with a few driver managers who look after some of IndyCar’s biggest earners, the massive infusion of money received by Andretti — an estimated quarter-billion dollars from his business partner Dan Towriss and the companies he leads — is what has allowed the team to double or triple what a Herta, Kirkwood, or Ericsson would have been paid prior to the nine-figure investment.
The knock-on effect has seen a single team move the driver salary bar to new heights and caused most of the drivers who aren’t in the upper tier of remuneration to use Andretti’s numbers as a bargaining tool.
“There’s definitely been an uptick triggered by the Andretti salary levels,” one veteran manager, who asked to not be named, told RACER. “They seem to be the ones who moved the goalposts. But it’s been atrocious with how poorly IndyCar drivers have been paid. In general, we haven’t seen salaries like this since the mid-to-late ’90s when Michael and those top guys were on close to $10 million. And those numbers have not been anywhere near that for a long time.
“Still, there’s maybe three or four guys on the big numbers and the rest aren’t, but they’re now trying to get there after seeing what Michael and Dan are paying people.”
Of all the key things to know about the $7 million rate for Herta, it’s how the sum has always been spoken of as an elevated retainer Andretti and Towriss paid for him to be the future leader of their Formula 1 team.
With the door to F1 currently welded shut for Andretti, Herta’s grand salary has become an outlier — a fantastical expenditure — in a series where the majority of teams aren’t ready to elevate the accepted $1.25-2.5 million to $3 million or more across the board.
“It’s not always that driver salaries match where the sport’s at,” said Pieter Rossi, who manages his son Alexander and others in the series. “I have to be really sensitive in my position because team owners need to be able to operate a team at a high level and the cost of doing business in motorsports has gone up in the last four years. Inflation has hit everywhere, teams have budgets, and it’s costing more to operate the cars to be at the same level to win races. And it doesn’t always necessarily match being able to pay a driver what they’re worth at that time. You hope it does.”
Between three-time Indy 500 winner and four-time IndyCar champion Dario Franchitti and his teammate, six-time IndyCar champion and 2008 Indy 500 winner Scott Dixon, the Chip Ganassi Racing drivers were regarded in the late 2000s, through their final on-track season together in 2013, as the two highest-paid drivers in IndyCar with rumored salaries in the $3 million range.
Dixon maintained that top-salary distinction afterwards, with something in the vicinity of $3.5 million spoken of as the best of his generation’s base annual retainer that’s carried into the 2020s.
The question facing drivers and teams today is whether the market can bear a widespread spike in retainers — one that would take the previous income peak paid only to the best few drivers and normalize it as the new standard sought by half the field.
“What I’m seeing in IndyCar at the moment is that salaries are definitely increasing,” Rossi added. “At the same time, it’s got to match with what the teams are able to pay at that given time because each owner has a different playbook. If you look at the top four teams in McLaren, Andretti, Ganassi and Penske, they all are able to succeed at a very high level, but they have a different playbook on how they approach things. Some teams don’t have enough to pay the top-line drivers. And then you have other teams that have the resources to that and are able to contract the drivers at a high level.”
It’s here where Herta’s recent F1-inspired income has been a blessing for some of his fellow IndyCar drivers who, with that giant rate to cite, have broken through the Dixon barrier and started to command salaries that match or exceed the six-timer’s income. All despite having achieved next to nothing when compared to Dixon.
And that’s where Newgarden’s situation is so thoroughly interesting.
Anecdotally, Penske has never been accused of paying his modern-day drivers more than the Dixons and Franchittis. Being in one of the best teams, with the ability to win multiple races every season, has often been mentioned as the tradeoff that comes with the below-market-rate salaries.
The first grumblings of Newgarden wanting to be paid like Herta surfaced last summer, and unlike some of those who are currently earning more than Newgarden, his pair of IndyCar championships and Indy 500 win would easily qualify him to receive a new deal that reflects his accomplishments and value.
Of Newgarden’s realistic options, he has four teams to speak with that could pay a healthy salary and offer a chance to win multiple races, starting with Andretti Global, Arrow McLaren, Ganassi and Penske. Among the three that aren’t Penske, only one team — which spoke under the condition of anonymity — confirmed to RACER that contacted has taken place with Newgarden regarding a drive in 2025.
Never say never, but as the owner said of any desire Newgarden might harbor of receiving a financial windfall at Andretti, “I think he missed his window.”
With the downsizing from four cars to three and, critically, its multi-year deals with Herta, Kirkwood and Ericsson, the timing is off for a union of Andretti and Newgarden. With all three drivers locked into contracts through at least 2025, there’s no obvious path to join IndyCar’s richest team.
Not only does Andretti have no plans to go back to four cars next year, but it’s also highly unlikely it would pay Newgarden a huge Herta-size wage and commit another $8-10 million to field a car on his behalf. Is Newgarden among the best we’ve seen in the 2000s? Without a doubt. Would Andretti spend $15-17 million across a salary and car budget per year to have him? It’s not impossible, but it’s at the far end of being feasible.
Arrow McLaren has been mentioned aplenty as the most likely destination for Newgarden, but like Andretti, any hopes of tapping into McLaren’s deep bank account to receive a life-changing contract isn’t on the cards.
The team recently placed its big driver salary spend behind Pato O’Ward, whose new contract can pay up to $4.2 million per year if all the incentives are achieved. Although Newgarden would be worthy of a bigger contract, O’Ward is McLaren’s franchise IndyCar driver and it looks like it’s another case of missing the grand payout window.
While the team has as many as two seats it could need to fill if it doesn’t extend Alexander Rossi and David Malukas, Newgarden would need to come in around O’Ward’s level, which might not be that big of a bump to what he’s earning at Penske. In plain and simple terms, nothing close to that magical $7 million figure is waiting to be taken at Arrow McLaren.
And then there’s Ganassi, which has two of the three or four best drivers in IndyCar. Reigning champion Alex Palou is signed to a multi-year deal (we’ll go ahead and assume he’ll honor it) and Dixon is said to be on the books for another year or two which, like Andretti, means there’s no obvious car for Newgarden to drive next year and no $8-10 million car budget to go with whatever salary he’d want to command.
In time, Newgarden would be a perfect fit to take the baton from Dixon whenever Dixon decides to retire, but that time isn’t now, which would seemingly take Ganassi off the board. If he wants to consider a switch in a year or two, plenty of interest will be there.
There are two other factors are said to be associated with Newgarden, starting with his affinity for signing short-term deals, which could be something he uses to his advantage if he elects to stay with Penske and resume testing the market a year from now. As well, Penske is also understood to be fond of driver contracts that run through April or May, which could lead to some swift decision making on Newgarden’s behalf.
Penske would have no problem attracting drivers to step into Newgarden’s seat, with the likes of Christian Lundgaard being available after 2024, and Rinus VeeKay is also shopping for a front-running opportunity once he completes his contract in September. Callum Ilott is untethered for 2025, and if Penske wanted to promote from within, he has ex-Formula 1 driver and IMSA champion Felipe Nasr on the Porsche Penske Motorsport IMSA GTP payroll and IMSA champion Dane Cameron to draw from.
And there are other great teams for Newgarden to consider, but after the top four, the available dollars and likelihood of being a title contender fall off rather quickly, which simplifies his realistic options.
So, with Andretti, McLaren, and Ganassi looking like longshots to deliver the salary hike Newgarden is hoping for, most of the team owners and drivers I’ve spoken to think he’ll push for more money and end up staying with Penske.
Leaving is indeed a possibility, but most of the likely destinations say the departure would have to be for reasons other than great financial enrichment. The silly season, which never seems to end, is going to be interesting to follow in the months ahead.
