Yes it does. This is meant to be a simulation afterall. Most of us won't be playing this game with the intention of deliberately crashing, but if you have an accident you'd want it to look believable wouldn't you?
If games like Dirt 2 can do a reasonable job of this then why can't a company with the resources and talent of Polyphony? I remember them saying a while back when criticized about the absence of car damage in previous versions that they wouldn't add it unless they did it right. Well, this isn't right.
For the sake of realism, which is what this game is advertised as, the damage needs to be improved before the release.