At present, the damage isn't as pronounced as the 360 version (which itself leaves something to be desired), although I was able to snap my front wing off, which is immediately one better than the 3DS' effort. However, the 3DS version made the damage model stand out even more by having awful AI that seemed to do everything it could to get in your way.
Not so here. Races look and feel much more organic. I raced around Monaco in the dry and Sao Paulo in the wet and the AI was mostly very good. I say 'mostly' as I was handed the machine set to 'easy' and the cars were going much slower than they should around the Monte Carlo street circuit, allowing me to win from a 16th position grid slot (yes, I skipped qualifying 2 & 3 - good spot). That said, at least they weren't crashing into the walls all the time like they do on 3DS. Bonus.