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LegitHyperbole said:

Have you tried Rally games? They are a fantastic example of how to handle difficulty in a driving game which is a genre that has the absolute cheapest difficulty settings imaginable with things like rubber banding or just slowing and speeding up cars with no nuance to the AI behaviour. The difficulty in Rally games comes from your ability to focus and get in a flow state, it's a magical experience to play at a high difficulty even if you have to slowly raise the difficulty bit by bit until you get there, nothing changes to the game but the speed you manage to take the game on at and damaging your car less to beat the decreased time.

I've played several, favorite being Colin McRae 2005.

What bothers me about rally games is that in major game modes you're racing against randomized numbers. If you finish on same seconds, it's complete matter of luck whether you win or lose.

Xpand Rally wasn't the best game, but it was a great experience in difficulty. The game has Arcade mode and Simulation mode, basically same thing on different settings. But having played the Arcade, starting Simulation you suddenly have to learn to drive much better, staying on the road as you can't take much wear.

But I don't think I often get flow state in rally (compared to track racing) because it's less exact and precise. In rally there's extremely rarely a feeling of "perfect" driving, it's more of making as small mistakes as possible. Although the co-driver sound does give focus.