Parallel: I'm only going 5 over the posted speed limit, is that safe enough?

Half of the sentence you were quoting was missing from what you quoted, which makes it look as if Ripples was only planning on using a disclaimer. But he also said he would change the designs and names to distinguish the cars. I don't see how "going 5 over the posted speed limit" is a parallel.

Aside from the fact that there's no such thing as not having a gray area when it comes to trademarks (meaning that you can't really compare the issue to something as well-defined as a speed limit), changing the car designs to prevent them from resembling the originals too much, changing the names entirely, and adding a disclaimer for good measure seems to me like a very responsibly cautious thing to do. There are some things that are not aesthetic choices, but engineering choices, so I don't see how you can go further than that without making cars that look nothing like cars and wouldn't function in the real world.

Also, I find it regrettable that copyright has been brought up. Copyright can potentially be an issue in certain aspects of a car's design, but realistically, most aesthetic designs on a car are so trivial, they probably aren't even covered by copyright. This seems to me like worrying about the "copyright" to the design of an ice cube tray, a shoe, a hairdryer, etc.

You can't use commercial product names as they trademarked. You definitely need permission to use them, or you will get into trouble. That being said, if you have good graphics and reach, you can always ask the companies and see what kind of answers you get. That's the bane of working on a title of this genre. Same with guns. You can't use gun names because the companies trademark them. People try to debate copyright law, but I've read the law in Canada, there is no wiggle room. When it comes to writing and music, reproduction and public performance is completely illegal. The 30 second rule is a myth. You absolutely need permission to use anyone's protect work and trademarked names. The only exception to copyright is news, parody, documentation, and education. To legally use fair use you need to satisfy all required credits.

By including a disclaimer, something like "This car that may look similar to a Ferrari really isn't a Ferrari", if Ferrari actually cares and brings it to a judge that can be used as evidence of intent and liklihood of confusion.

Just to clarify, that wasn't the disclaimer I was recommending. I was recommending something more like this:

"The car models in this game are not intended to resemble or portray any real-life car models. Any resemblance to real-life cars is purely coincidental."

But here's the thing: It is irresponsible to recommend anything other than "stay away from stuff you don't own and don't have permission to use."

I don't know, it seems like an unrealistic standard to me. You can't design a car without referencing cars; first of all, you've already seen the cars, so you'll end up getting ideas from them subconsciously anyway, and second of all, all work is derivative; no one just comes up with 100% original art.

There is no good way to recommend "copy another person's IP but change enough to make it look like you made up your own" that can be a good recommendation.

This may seem like a nitpick, but I find your language here to be rather sloppy, and it stems from your insistence on the term "IP". A car design is not "an IP". It's a combination of various engineering choices (most of which are probably not patented), aesthetic choices (most of which are probably not copyrighted), and distinctive looks (some of which may be considered trademarks). Of course a lawyer should be consulted on stuff like this, but in this case, I don't see copyright as being a real issue. Trademarks seem to be the most important issue. And since, as you yourself said, trademarks are about preventing confusion, you don't need to start in a vacuum to avoid trademark infringement.

The only exception to copyright is news, parody, documentation, and education. To legally use fair use you need to satisfy all required credits.

In Canada, yes, but the U.S. has quite strong, flexible fair use protection.

11 minutes ago, Ripples said:

I am just confused about the copyright of the vehicle models, up to what extent the resemblances are acceptable.If I add a different spoiler,distort the basic original model a little and change the body proportion of the cars , will this eliminate the risk of lawsuit?

Nothing completely eliminates the risk, there's just more or less risky.  Unfortunately, it's really hard to draw that line for you, it's something you'd really need to speak to an experienced legal professional about.  A detail as small as the layout of a light-cluster or the particular shape of a spoiler might be legally protected, whilst other seemingly more obvious details may be absolutely fine.

If you see something that's really distinctive and unique to a particular model or brand, it's more likely that it may be protected and that the owner might try to enforce that protection, whilst something really common that you see everywhere might be less risky -- but we really can't give any definitive answers, it's a huge grey area.

Sorry that's not especially helpful, but it is what it is -- really the only correct answers to this sort of question are:

• Speak to a lawyer, and
• Do your best to try to avoid copying any (and especially any distinctive) details.

1 hour ago, Ripples said:

am just confused about the copyright of the vehicle models, up to what extent the resemblances are acceptable.If I add a different spoiler,distort the basic original model a little and change the body proportion of the cars , will this eliminate the risk of lawsuit?

Nothing eliminates risk as anyone can sue you for anything at any time. 

Technically, it's about the process of creation. Whether you've made a derived work or not. If you traced the original car directly, this work (the tracing) is derived from the original, so is infringing. Any modifications you do from that point are also a derived work. 

However in practice, if you change it enough that no one can tell that it started off as a derived work, then you won't get caught out. 

If you drew it all yourself without copying from another design directly, then you're good. There's a bit of a grey are for if you were inspired by something g and recreated it's style. That's mostly safe, but at the most legally-paranoid place where I worked, the artist were banned from using Google-images, and we're only allowed to look at reference images from collections that we'd bought the rights to... At every other job I ever worked, gathering reference/inspiration material from Google was common/fine. 

"Nothing eliminates risk as anyone can sue you for anything at any time."

This is true. You don't actually have to do something wrong to end up in a lawsuit. There just has be perceived damage. 

I'm glad I don't like cars. I learned something though. This is one niche well cornered by friends of the industry. I would say, unless you are good at car design, maybe hire or outsource car design. Someone is designing all those vehicles, and they would be the people to ask about designing cars. Actually, if you want to get technical do a study on car design. Ask someone with knowledge what constitutes "public domain" in the world of car design. I think knowledge would be key in this instance.

Look at car design like boxes. Your hood is a box, your roof is a box, and your tail end is a box. Start with the most basic blocked out concept of a car, like a kid would draw. Now what curves are you going to give those boxes?