Sorry if this is a bit off topic being Forza 3, but does anybody know if the game picks up in difficulty? Or if there is any other ways to increase the difficulty?
I’m Currently at about level 20. On the hardest difficulty with no assists, I was able to beat a much faster car by about 5 seconds while crashing twice. The stage was only about 2 minutes too. Ridiculous.
Also, does anybody know of any non-rally racing games with a remotely difficult setting?
Let me preface my answer with this, I have leveled up in a very non linear way. I am very behind in very basic stuff like PR and Fan stuff but have done a lot of random things through online adventure so I have had money to have entered races and challenges with X level cars when you were probably to start there with an C level car. Honestly while the X level cars sometimes are simple too much of an advantage for some challenges, it has hurt my driving in learning the Forza driving system. I have developed a lot of bad habits like instead of taking a corner slow and hard on power out of apex, I use brute force and speed to bounce my 300 MPH car glancing off landscape to correct my driving line.
I am not certain where you are in your tuning and such but the game will get harder as you drive better and better cars. Early on everyone pretty much has the same kit but based on the other drivers you may be racing a Raptor on Rally course against some lunatic who has tuned a Bugatti to handle the chop like melting butter.
One of the biggest surprises to me what when I got in my first good race with talented drivers (not people like me who used to use landscape and other drivers to slow me down 
). In an Online Adventure mode when I finally felt competent with my car and tune, destroying the AI race after race prior, I barely placed and got a few DNFS!
You don’t mention outdriving other players so FH3 may not be the typical challenge that some racing games require. Driving games where it is all about repetition and precision and takes hours to go forward because you have to learn the track by heart before you can beat the AI. I personally hate but also love that style of racing game because even though the concentration it requires is fierce, it starts to become muscle memory and you just turn off anything thinking or otherwise in your brain that is keeping you from being robotically precise.
FH3 is an arcade sty;e and arcade racing is all about challenging other people and friends; it is very deep though for an arcade type racer coming from the old school racing games (first racing game I have been enticed to play in 4 years at least).
The difficulty in FH3 is not the AI thankfully. The AI can be a bit cheap as well (beat that dead horse). The “difficulty” in FH3 is the vastness of all to see, collect, build, race tune, drift ,rally, drag race…mastering all of this. I have found myself taking hours to just doodle on some car I like and I am hardly the artistic type. The art program in the game is very much like the game as a whole. Very basic shapes and some semi advanced tools that once you start pounding on some scrap for a few hours something lovely takes shape. What started off as a drawing of autumn leaves turns to an ugly red, brown and orange blizzard but then becomes how you learn to layer and simulate “rust” to make a restored muscle car back into a rat rod/barn find.
I think what you may be missing can be found in the Rivals rather than Exhibition against the AI. For the purist racer you can race other people in a semi -multiplayer experience of Rivals where you are driving against another driver but against their ghost can be quite an experience. As you progress, your rivals become better and better and the game becomes harder and harder as you improve. For example, one Rivals race, I beat the first Rival on a map I have never driven in 5 minutes where he took 10 minutes. Then the next guy was 4:35 so I beat him by say 20 seconds and then I went maybe another 2 or 3 races before I was not getting better than the clearly better Rival and had to start improving bits and pieces to come at them again…Keep the rubber side down, boy, and you will find the challenge in the game that you are shrugging off 
Good luck
This is about FM3. not FH3.
That’s strange. What a “much faster car” means? Check the drivers before the race and use the same car they are using to try.
In your example, if the race was so short with curves and you got a car with a much better acceleration than a faster car you’ll obsiously win. But if you try an oval racing you’ll see the faster car vanish in front of you.
So perhaps you just got lucky because the situation you described is possible. Which is the race and the cars?