It has very little to do with setups. Sure, a decent setup is much better than the default setups, but fast times rely mostly on driver skill. Search the forum for "Bob Smith" and see his signature. There you will find the EasyRace sets that he created. Start with those and go out and learn how the cars handle. It's not as easy as it looks. Those fast guys, they've been racing LFS for years. Some of them have over 4000 laps on just one track/car combination.
LFS is very realistic, which means that it takes time and determination to learn and improve lap times. You must learn the tracks precisely, learn how the car reacts, learn about weight transfer and throttle control, learn about threshhold braking and trail braking, learn the art of racecraft and track awareness. It is the closest you will find to racing on a track in real life. you wouldn't expect to go to a real track after a month of learning and expect to be as fast as those who have been doing it for years. You can't expect to do the same in LFS.
Again, try out Bob Smith's EasyRace sets and learn every corner of the tracks. Spectate the race and watch the fast drivers to see how they drive and race the track and others. After you learn the tracks and corners without needing to think about what corner is coming up, start out by braking fairly early (around the 150 meter marker). Gradually increase your braking zone closer to the 100 meter mark.
Eventually you get there with the right determination. It is a great journey to move from being a complete newbie to being competetive in the field to becoming one of the fast drivers. There are some who are extremely fast and no amount of improvement will get you there. I'm at that spot. I'm not extremely fast and have been doing this for 2 years with LFS. But most of the time I can hold my own and many times folks look at me like I'm some kind of race driving genius. It's only because the fast guys aren't out there at the time, LOL.