Under options/gameplay, you can turn on "Simplified collision physics", which means cars can pass through each other, but they can still collide with the environment. This works in the multiplayer I'm doing! I turned it on so my friend and I could drive through the hills of Italy without constantly bumping and flipping each other. So yeah, you can do exactly what you want! Now that I think about it, you could also press F7 and put the camera up high, showing the full track (if it's a fairly small track), so that you don't need to deal with the camera zooming out if the two cars separate.