Mostly custom. But I use pretty much stock settings for the B and A license Nationals. For the B Nationals, I use stock suspension, tires, tranny, drivetrain, no LSD or traction controls...and power modifications 50hp below the max...so for instance at Midfield (196hp max I think) I'll only modify ad car till it has 146 hp or as close as possible. One exception is the B-license Moutain race...this one I'll allow car mods 30hp below max...those Lotuses and Minis are almost impossible to outmanuever, otherwise!
For the A nationals, I'll allow sport tires, suspension, & flywheel, single-plate clutch, non-customized LSD, stage 1 weight reduction, brake pads (but no modulator), and power modifications 75 hp below max. For the special races, I like being a bit looser...
The settings above will really help make the game a fair fight!