A formation lap is traditionally a slow lap that takes place between 30-75 mph behind the safety car. Interestingly, the 1983 British Grand Prix was the first F1 race with a full parade lap. The FIA found that warming the tires and brakes dramatically cuts down on first racing lap crashes, though you’d never believe it looking at the 2022 British Grand Prix.
Conflicting reports have quoted both terms, but the parade lap seems easier to facilitate. A formation lap would require a special set of circumstances and perhaps a change to the typical race operation.
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