Updated 3.1.-08
Another know-it-all post from me
I tried to search this stuff from the various manuals and wikis and found pretty much nothing. So it is the goddamn time to do something about it 
What is car damage?
In real life your car can get damaged in three ways. One is that you hit an object and get mechanical damage. The second is that you overuse the car, ie. overrev the engine or shift gears without enough finesse. The third is that there is something wrong with the parts, and it won't be able to take the stress and breaks sooner or later. Manufacturing and designing errors are good examples of this. Quite similar to this is the normal wear of the parts. Even if there are no errors in the part, it still won't last forever. The best and only example of this in LFS are the tires.
While LFS is very realistic in terms of tire physics and suspension simulation, the car damage has got less attention in the last updates, if not got tweaked down a little bit. LFS does simulate deformation of suspension parts effecting to the geometry (= tires get bent into interesting angles) but the whole system is still wip (Work In Progress). The wip part shows in that the suspension parts can't simply break in to two; generally, the parts just get shorter, even the carbon fibre ones. LFS has also engine damage modelled so one needs to be careful not to damage the engine by misuse. The effect of engine damage is quite minimal, however, and in some cars you can shift quite recklessly without any visible or audible damage to the engine or transmission. Currently the transmission can't break at all, but engine damage is there. Cars are fitted with rev limited so it is harder to damage the engine with a bad upshift.
Car damage in LFS
I have attached some pictures to this post to show what kind of damage you can get and what it means and how LFS shows it. These pictures are attached below the text and can be enlarged by clicking on them. You should pay special attention towards these pictures while they are discussed below. There are information in the pictures that otherwise may not get noticed or is hard to explain in plain text
Let's start with engine damage.
This is quite easy as currently a broken engine in LFS means that the engine simply loses power. A broken engine can be heard from the peculiar sound it makes, it sounds a bit like "popcorn". This is the most recognizable way of how engine damage is implemented in LFS. You can check this by yourself by accelerating the to higher speed and the quickly shifting back to lower gear. As a result you have a car with damaged engine. The engine can't be totally killed with this method, even if the said method is quite a dramatic one. The engine state doesn't deteriorate after there is some damage if you stay below the safe rev ranges, so you can still drive the car without fear of DNF.
Losing power may not be an issue on short pickup races but when the races get longer, with the possible driver changes, it gets more attention. The main reason for this is that you are driving longer stints which, in turn, means that even small amounts of engine damage can have noticeable effect on you total race time because the small time penalty gets multiplied over large number of laps. Engine damage can not be fixed on a pitstop. This probably the single most biggest improvement from Y patch. Before Y the engine damage was repaired immediatelly while in pits.
The most probable situations where engine damage can occur when you are shifting down quickly while braking and when accelerating out from the corners - things you do all the time in LFS. When accelerating and upshifting it is important that you lift the throttle to prevent the revs getting too high. On some cars this kind of overrevving will cause engine damage, on some cars it won't (as much or at all). Keeping the throttle on while upshifting has, however, a performance bonus in turbo engine cars and this can be seen as some kind of trade-off between speed gain in short term and consistency in long term. There is no fatal race-ending damage so sometimes a risk is more than worth it. Especially when you are not paying for the damages in real life cash.
Below are listed the how the cars get damaged by revving the engine too high (thanks filur:
Running out of fuel doesn't damage the engine, but will stall it. You need to start the engine after more fuel has been added, if you made it to the pits. Starting the car is done by pressing the "i" key twice, i for ignition. First off and then on again. LFS car cockpits do have gauges for engine oil temp (for example) but at the moment they are not working. So they tell nothing to you about the car at the moment. The turbo pressure gauge does work but engine damage has no effect on this which is to tell that turbos can't get damaged.
Clutch damage
The clutch can overheat and this is shown with CT ("clutch temperature") bar on F9/10 screens. Basically, the more slip - the more heat and more heat = less torque transfered and again = more slip. In normal state the CT bar is grey and when damaged the bar changes red.
Clutch overheating can be somewhat avoided by keeping the engine revs on reasonable levels while shifting. Shifting to higher gear means that the engine revs need to drop certain amount of rpm for minimal slip in the clutch. When changing to lower gear the engine needs to rev up and the vehicle needs to slow down for the speeds to match. Otherwise the clutch has to slip which causes it to heat up. The slip is what causes the clutch to heat and misuse of the clutch will make the clutch to eventually burn out. It is not possible to repair clutch on pitstop.
Suspension damage
LFS suspension is based on bars that can get longer or shorter, depending on the forces and impacts imposed to them. LFS can give you somewhat precise information about suspension damage through the F10 menu. If you press F10 you will see 4 bars per tire describing the damage attributes in graphical form. Let's look at the LX6's F10 view. (attachment 1) It reads UPR, LWR and TOE. There is no text linked to the vertical bar - yet. UPR stands for upper suspension arm, LWR for lower suspension arm and TOE is simply toe-in or toe-out.
This view won't give you any numerical data, but it can show easily what has happened to your suspension. If all bars are light gray, it means that the suspension is 100% fit and operational. If you see any red bars, they mean that the particular part is totally broken. (Red bars can also be interpreted as collapsed suspension components. Term collapsed is used later on.). There are in-between stages as well, and these are shown in orange color. Basically they tell you how broken/collapsed the particular part (spring/damper or bars) is or that the part isn't actually broken, it has just changed its attributes due to collision and/or impact. If we still look at the front left suspension info on F10, we see that the UPR is totally broken as is the LWR too. The TOE tells us that the tire is not pointing to the right direction plus it is damaged but still operational. This can be also noticed from how the car handles and drives.
But basically the red doesn't mean that the part is totally collapsed, in fact it is quite operational in terms of "it's still there". The color just tells us that the part has been elongated/shortened too much, or incase of a spring/damper, the state of the component is collapsed. This is most obvious when you look at the vertical bar. If it was red, the suspension would no longer have any resistance for motion (shoch absorbers) or travel (springs). In clearest form, the tire can move freely up and down without any force stopping or slowing it from doing so. If the vertical bar has orange section, it means that suspension travel has been reduced due to suspension damage. In current state the damage just edits the suspension components' properties, mainly length (rigid parts like bars and joints).
However you find that not all cars in LFS have this advanced suspension type. Cars using MacPherson struts (UF1 front suspension) won't obviously have upper suspension arms and cars with trailing arm suspension (UF1 rear suspension) won't have neither in LFS. In attachment 2 you can see how an MRT5 race car and UFR race car differ in this.
Tire damage
Each tire of the cars in LFS does have 48 sampling points for heat and wear, divided into three rows. Eventually that means that you can end up with flatspotted tire/s if you aren't cautious with your driving style. Flatspots in LFS are parts of the tire surfaces which are hotter than the tire surface next to them. Hotter tires have less grip in LFS, after you go over certain temperatures. How are these linked then? Well, because the flatspotted part is hotter than the surrounding, it is more likely that when you next time lock the wheel under braking it will stop rotating at the same position, making the flatspot even more dangerous. Flatspots also change the tire radius and the form of the tire which results in less grip, shorter tire life and puts more stress to the suspension components. Flatspots can be noticed by looking at your F9 menu while keeping the car in motion, and by looking at the specific tire temp readouts i your F9/10 menus. You'll see that the flatspotted part will blink in red color while the tire is rotating. The red color means that the flatspot is still hot.
After the flatspot has cooled down it has normal grip, like the rest of the tire. However, the the parts of the tire surfaces which have been flatspotted have less rubber, so these flatspots usually cause tire blowups later in race due to wear. In the third attachment I have shown LFS tire data (F9 menu) just before a tire blowup and after it. Notice the front left tire has still some tread on it but hard braking causes too great forces for the tire, resulting tire failure.
Body damage
In LFS the car body damage is all visual. It does not alter the aerodynamics of the car nor would it twist the chassis either. So the tire angles and suspension geometries stay uneffected. Wings and other aerodynamic devices are uneffected as well. Basically chassis damage has no effect on gameplay. The only effect of body damage is that the car body can twist into quite interesting shapes which can make it hard to see out from inside the car.
(no longer updated as of 11.1.2009 by me)
Another know-it-all post from me
I tried to search this stuff from the various manuals and wikis and found pretty much nothing. So it is the goddamn time to do something about it What is car damage?
In real life your car can get damaged in three ways. One is that you hit an object and get mechanical damage. The second is that you overuse the car, ie. overrev the engine or shift gears without enough finesse. The third is that there is something wrong with the parts, and it won't be able to take the stress and breaks sooner or later. Manufacturing and designing errors are good examples of this. Quite similar to this is the normal wear of the parts. Even if there are no errors in the part, it still won't last forever. The best and only example of this in LFS are the tires.
While LFS is very realistic in terms of tire physics and suspension simulation, the car damage has got less attention in the last updates, if not got tweaked down a little bit. LFS does simulate deformation of suspension parts effecting to the geometry (= tires get bent into interesting angles) but the whole system is still wip (Work In Progress). The wip part shows in that the suspension parts can't simply break in to two; generally, the parts just get shorter, even the carbon fibre ones. LFS has also engine damage modelled so one needs to be careful not to damage the engine by misuse. The effect of engine damage is quite minimal, however, and in some cars you can shift quite recklessly without any visible or audible damage to the engine or transmission. Currently the transmission can't break at all, but engine damage is there. Cars are fitted with rev limited so it is harder to damage the engine with a bad upshift.
Car damage in LFS
I have attached some pictures to this post to show what kind of damage you can get and what it means and how LFS shows it. These pictures are attached below the text and can be enlarged by clicking on them. You should pay special attention towards these pictures while they are discussed below. There are information in the pictures that otherwise may not get noticed or is hard to explain in plain text
Let's start with engine damage.
This is quite easy as currently a broken engine in LFS means that the engine simply loses power. A broken engine can be heard from the peculiar sound it makes, it sounds a bit like "popcorn". This is the most recognizable way of how engine damage is implemented in LFS. You can check this by yourself by accelerating the to higher speed and the quickly shifting back to lower gear. As a result you have a car with damaged engine. The engine can't be totally killed with this method, even if the said method is quite a dramatic one. The engine state doesn't deteriorate after there is some damage if you stay below the safe rev ranges, so you can still drive the car without fear of DNF.
Losing power may not be an issue on short pickup races but when the races get longer, with the possible driver changes, it gets more attention. The main reason for this is that you are driving longer stints which, in turn, means that even small amounts of engine damage can have noticeable effect on you total race time because the small time penalty gets multiplied over large number of laps. Engine damage can not be fixed on a pitstop. This probably the single most biggest improvement from Y patch. Before Y the engine damage was repaired immediatelly while in pits.
The most probable situations where engine damage can occur when you are shifting down quickly while braking and when accelerating out from the corners - things you do all the time in LFS. When accelerating and upshifting it is important that you lift the throttle to prevent the revs getting too high. On some cars this kind of overrevving will cause engine damage, on some cars it won't (as much or at all). Keeping the throttle on while upshifting has, however, a performance bonus in turbo engine cars and this can be seen as some kind of trade-off between speed gain in short term and consistency in long term. There is no fatal race-ending damage so sometimes a risk is more than worth it. Especially when you are not paying for the damages in real life cash.
Below are listed the how the cars get damaged by revving the engine too high (thanks filur
:Running out of fuel doesn't damage the engine, but will stall it. You need to start the engine after more fuel has been added, if you made it to the pits. Starting the car is done by pressing the "i" key twice, i for ignition. First off and then on again. LFS car cockpits do have gauges for engine oil temp (for example) but at the moment they are not working. So they tell nothing to you about the car at the moment. The turbo pressure gauge does work but engine damage has no effect on this which is to tell that turbos can't get damaged.
Clutch damage
The clutch can overheat and this is shown with CT ("clutch temperature") bar on F9/10 screens. Basically, the more slip - the more heat and more heat = less torque transfered and again = more slip. In normal state the CT bar is grey and when damaged the bar changes red.
Clutch overheating can be somewhat avoided by keeping the engine revs on reasonable levels while shifting. Shifting to higher gear means that the engine revs need to drop certain amount of rpm for minimal slip in the clutch. When changing to lower gear the engine needs to rev up and the vehicle needs to slow down for the speeds to match. Otherwise the clutch has to slip which causes it to heat up. The slip is what causes the clutch to heat and misuse of the clutch will make the clutch to eventually burn out. It is not possible to repair clutch on pitstop.
Suspension damage
LFS suspension is based on bars that can get longer or shorter, depending on the forces and impacts imposed to them. LFS can give you somewhat precise information about suspension damage through the F10 menu. If you press F10 you will see 4 bars per tire describing the damage attributes in graphical form. Let's look at the LX6's F10 view. (attachment 1) It reads UPR, LWR and TOE. There is no text linked to the vertical bar - yet. UPR stands for upper suspension arm, LWR for lower suspension arm and TOE is simply toe-in or toe-out.
This view won't give you any numerical data, but it can show easily what has happened to your suspension. If all bars are light gray, it means that the suspension is 100% fit and operational. If you see any red bars, they mean that the particular part is totally broken. (Red bars can also be interpreted as collapsed suspension components. Term collapsed is used later on.). There are in-between stages as well, and these are shown in orange color. Basically they tell you how broken/collapsed the particular part (spring/damper or bars) is or that the part isn't actually broken, it has just changed its attributes due to collision and/or impact. If we still look at the front left suspension info on F10, we see that the UPR is totally broken as is the LWR too. The TOE tells us that the tire is not pointing to the right direction plus it is damaged but still operational. This can be also noticed from how the car handles and drives.
But basically the red doesn't mean that the part is totally collapsed, in fact it is quite operational in terms of "it's still there". The color just tells us that the part has been elongated/shortened too much, or incase of a spring/damper, the state of the component is collapsed. This is most obvious when you look at the vertical bar. If it was red, the suspension would no longer have any resistance for motion (shoch absorbers) or travel (springs). In clearest form, the tire can move freely up and down without any force stopping or slowing it from doing so. If the vertical bar has orange section, it means that suspension travel has been reduced due to suspension damage. In current state the damage just edits the suspension components' properties, mainly length (rigid parts like bars and joints).
However you find that not all cars in LFS have this advanced suspension type. Cars using MacPherson struts (UF1 front suspension) won't obviously have upper suspension arms and cars with trailing arm suspension (UF1 rear suspension) won't have neither in LFS. In attachment 2 you can see how an MRT5 race car and UFR race car differ in this.
Tire damage
Each tire of the cars in LFS does have 48 sampling points for heat and wear, divided into three rows. Eventually that means that you can end up with flatspotted tire/s if you aren't cautious with your driving style. Flatspots in LFS are parts of the tire surfaces which are hotter than the tire surface next to them. Hotter tires have less grip in LFS, after you go over certain temperatures. How are these linked then? Well, because the flatspotted part is hotter than the surrounding, it is more likely that when you next time lock the wheel under braking it will stop rotating at the same position, making the flatspot even more dangerous. Flatspots also change the tire radius and the form of the tire which results in less grip, shorter tire life and puts more stress to the suspension components. Flatspots can be noticed by looking at your F9 menu while keeping the car in motion, and by looking at the specific tire temp readouts i your F9/10 menus. You'll see that the flatspotted part will blink in red color while the tire is rotating. The red color means that the flatspot is still hot.
After the flatspot has cooled down it has normal grip, like the rest of the tire. However, the the parts of the tire surfaces which have been flatspotted have less rubber, so these flatspots usually cause tire blowups later in race due to wear. In the third attachment I have shown LFS tire data (F9 menu) just before a tire blowup and after it. Notice the front left tire has still some tread on it but hard braking causes too great forces for the tire, resulting tire failure.
Body damage
In LFS the car body damage is all visual. It does not alter the aerodynamics of the car nor would it twist the chassis either. So the tire angles and suspension geometries stay uneffected. Wings and other aerodynamic devices are uneffected as well. Basically chassis damage has no effect on gameplay. The only effect of body damage is that the car body can twist into quite interesting shapes which can make it hard to see out from inside the car.
(no longer updated as of 11.1.2009 by me)
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keep up the good work! I never realised you could actually damage the engine in LFS... man this game is just full of surprises 
