The current distance based penalties in time races do not work as intended. The harshness of the penalty is not consistent as it changes on your current position on the circuit.
With the timer running out instantly ending the race, no matter your place on the circuit, the penalty can be applied either on a straight or in a corner.
Where you can have a 250m lead on the straight, this quickly goes doen to 50m when going through a corner. The time based gap will remain the same, but due to lower speeds the distance in meters is significantly less.
Now imagine you’ve just gone through the hairpin at the end of the long straight at Hockenheim and the race finishes, but your opponent finishes the race just before the hairpin. They haven’t traveled that corner at slow speeds, not giving you the change to accelerate again.
If the race had ended 5 seconds later they would’ve been going slow and you long gone.
How to fix:
My suggestion is to rework the penalties to a time based penalty, but because the final result looks at distance, the penalty should work over distance too!
The penalty will look at the distance you’ve driven 1.234 sec back from finishing the race.
This will result in more consistent penalties and fairer results during timed races.
Note, a big part of this problem is the way timed races end, a rework of timed races as suggested below, working with timed penalties after finishing the lap would give even better results and matches timed based races IRL.