So I mentioned the LOD differences in cars recently, I have a visual example now. I chose a car that has a big difference in detail between LOD0 and LOD1 just for demonstration.
LOD-1 (Forzavista) - This is the highest quality model possible. Everything that was originally modelled for the car is shown in this LOD.
LOD0 (Player car at PC max settings) - As you can see in this case, the LOD0 is externally identical to the Forzavista model. This isn't true for all cars but is true for most. The only difference here is that under the bonnet, the LOD0 model will simply have a picture of the engine (because why render it if it's never shown?), while LOD-1 will have a full 3D engine. Since the Fiesta doesn't actually have a modelled engine, LOD0 and LOD-1 are identical in this case.
LOD1 (Player car on Xbox One (and PC settings equivalent), AI cars on PC max settings) - This shows a clear drop in quality. The Fiesta ST has a particularly rough LOD1 model for some reason - as you can see, the door panels aren't even modelled and are just textures instead, and the wheel arches lose a lot of curvature. I would never drive the Fiesta in FH2 because the 2D panel gaps was an irrational peeve of mine.
LOD2 (Nearby AI cars on Xbox One/PC settings equivalent, distant AI cars on PC max settings) - As it says on the tin. We're at a point now where you won't really see any of these LODs in gameplay as they're strictly used for transitions as a car gets further and further away until it simply isn't rendered anymore.
LOD3 (Further distant AI cars) - A pretty linear decrease in quality. A seam is now visible at the bottom of the grille, and the wheel arches have very clear flat edges.
LOD4 (Further still distant AI cars) - Interior details are drastically cut at this point. The inner sides of the door pillars are removed, making them seethrough. The seats are essentially square and the interior is cut off at the bottom-window-level by a simple black plane, serving as a pseudo shadow to hide the cut details below. Note how the rims are simply textures at this point too.
LOD5 (Near-disappearing AI cars, road reflections) - This is the lowest possible detail for a car. Details are completely gone, and some areas of the car are downright sloppy (this isn't necessarily a point of criticism, because after all, why make a car precise when it's only ever seen at an extreme distance?)
The grille has been replaced by a lower quality texture, the planes for the rim textures have barely any sides, and the door handles and mirrors are entirely gone.