The intention of this thread is to list all the arguments for and against user-created cars and tracks (a.k.a. modding), in hope that it will save repeating the same arguments every time someone brings up the subject again.
First and foremost, let me stress that modding is not the choice of the developers. When Scawen and Eric started LFS, they decided against modding. The devs have clearly stated that they, and they alone, decide the direction in which LFS will be developed. As such, discussions about modding are fairly academic: the LFS world is not a democracy, even if it has free speech.
Constructive additions are welcome. If you have any corrections, new arguments or counter-arguments, then please post. But this is not a poll. Do not post here just to stress your desire for (or repulsion of) modding.
Pros
Attracting new customers
Some simracers are interested in LFS, but are put off because their favourite type of car or track is missing (NASCAR, WRC, supercars, dirt ovals, the Nordschleife, etc.). Third-party content could generate extra sales in LFS licenses, and growth for the community.
Preventing boredom
Many LFS enthusiasts eventually stop racing, because they get bored of racing the same cars and tracks over and over again. They often move to a different sim, when a fresh supply of content could have made them stick with LFS.
Exploring new possibilities
Talented creators of mods could find new ways to use LFS -- possibilities that Scawen and Eric had never thought of, or had no time for. As an example, consider InSim. It was originally made to enable server admins to control races. Other people then created programs that did track rotation, and online racing became more attractive with no extra effort from Scawen.
Cons
Need to guard quality ("crap mods")
LFS may not have a lot of content, but it is of a high quality. By contrast, rFactor has a lot of mods that are rubbish. If you download a new car, it may take a while to find out that it has a fatal flaw that can not be solved with setup tweaks. To prevent such frustrations in LFS, there would need to be some kind of quality control.
A related issue is consistency. If the car and track that you use were made by different people, with different preferences concerning graphics, the car may look distinctly out of place on that track. LFS has no such problem now, as everything has gone through Eric's hands.
Compatibility with LFS patches
A change in the physics often means that the cars, and possibly the tracks, need to be updated. In some cases the car/track data must be extended, to support a new feature. In other cases a change in the physics calculations may require a re-balancing of car classes.
Anyhow, almost every new LFS patch will take a coordinated effort from the content creators to update their mods. Not updating will mean that the mod can no longer be used.
Versioning
A common complaint from users of rFactor is that when they want to race, it takes a long time to get the correct version of the cars and tracks that are used. If you have an hour of spare time and want to do some pickup racing, you don't want to wait for 15 minutes while the mod is being downloaded and installed.
Licensing
Your dream of racing the latest Ferrari on the Nordschleife may never come true, even if LFS was open to mods and an army of talented modders started working. The reason is that some car manufacturers and track owners jealously guard their property, and threaten modders with lawsuits. The only way out is to pay a hefty license fee, and who would pay for that in advance?
Thinning-out of online racing
Even though LFS has a large user base, most online racing takes place of a handful of car/track combos: FBM/BL, GTR/AS, BF1/KY, etc. If you prefer one of the other cars or tracks, you have difficulty finding people to race with.
This problem will get worse if modding is allowed. The majority will still flock around the popular combos, but the rest of the racers is spread out over an ever-increasing number of combinations. They must choose between racing alone, or choosing a combo that they don't know well enough to be competitive.
Conflict with LFS business model
LFS has three types of license: the free demo, the cheap S1 license, and the full S2. They contain the same software, and (almost) only differ in content. In other words: the LFS business model is built upon paying for content. The extra cars and tracks are the main incentive for demo users to buy LFS, and for S1 users to upgrade to S2.
If you allow third-party content, you must only allow it for S2 users, otherwise it will hurt the devs' income.
Difficult to modify LFS now
If you look at the car and track selection screens, and at the pages in LFS World, you can see that they are geared towards a fixed set of cars / tracks. When you get a lot of extra cars and tracks, these screens must be redesigned. What's more, this could also be true for the internals of LFS. That means that LFS and LFSW may need to be adapted in many places to accommodate the new content. From an engineering viewpoint this is not a wise thing to do, because LFS is nearing the final stages of S2 development. It may introduce all sorts of bugs which take a long time to iron out.