> For racing games or flight simulators or such it is less of a problem,

Cars are also easier to make photorealistic. Less uncanny valley effect, lots of flat shiny surfaces.

What absolutely breaks immersion for me in most AAA car games is the absolute lack of crash, scratch, and dirt mechanics. Cars racing around the track for 2 hours don’t look like showroom pieces! Make ‘em dirty darn it. And when I crash into a wall …

I’m really excited to try Wreckfest 2 when I get around to it. Arcade-ish driving, not super photorealistic, they put it all on realistic soft body collision physics instead.

I seem to recall hearing that car manufacturers only allow their vehicles to be licensed for use in games if they won't really get visually damaged. Kinda funny to see cars just bounce off each other in Gran Turismo. But rally games tend to be better at that (I may have lost a door or two (or a few dozen, but who's counting) in WRC).

You might like BeamNG.drive. It has soft-body physics simulation (also for driving dynamics, so it's not arcadey) and decent graphics. It's more like a sandbox with half-done "actual game" mods AFAIU, but happens to be quite popular and very highly rated anyway. I'm on the fence about buying it myself.

Collin Mc Rae Rally 2 and 2005 did it fine for its era. What CMR2 did was incredible, the damages were very real.

I had a great time recently on my first trip to a racetrack, and the most surprising thing to me was how all the cars were utterly beat to shit. Not like in a bad way, but in like... a sports gear way? They were all working (well, mostly, one guy had a real bad time on his second lap and I'm pretty sure his engine was DONE) but the panels were quite battered, and a number had full on body damage I'm assuming from track contact.

And granted this was an amateur race day, just weekenders having a good time, but it makes sense when you think about it: if the body panels aren't like falling off and are just a bit beat up... why replace them? Especially on some of these cars (late model Corvettes and Mustangs) they don't come cheap at all, and they'll require refinishing and you have to do your livery over again too.

Like a hockey player doesn't buy a new helmet every time they get hit, they/the team would be broke before the season was out.