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TOE BASICS
 
Toe, as simply put as possible, is the direction that the front of the tire is pointing. Granted, there's no open wheel racing in Forza Motorsport, but it's easier to see toe angles in a formula car. And besides, they look cool.
Forza Motorsport 3 toe basics, toe-out, neutral toe and toe-in
So what's the purpose of toe? Well, generally speaking toe-out is for enhanced turn in (most notably, initial turn entry), while toe-in is for stability. Toe angles also affect tire wear. Toe-out wears the inner edges of the tires faster, while toe-in wears out the outer edges. This is mainly due to an increase in tire scrub as the car moves forward on the track. The reason we live with this additional scrub, and slight loss of straight line acceleration is because it also enhances handling characteristics.
"Toe-in between a pair of wheels, at either end of the vehicle, is a dynamically stable condition. If load is transferred laterally between a pair of wheels, by a bump - for instance - the load transfer will cause a relative increase in the slip angle of the more heavily laden wheel. If the wheels should be toed out when this occurs, then the deflection will cause the vehicle to steer towards the inside wheel, which is pointed toward the upset to begin with and away we go. This can be most upsetting at the front of the car. At the rear, it is downright vicious.....On the other hand, if the wheels are toed in, the vehicle still steers toward the inside wheel, but that wheel is pointed in the direction we want the car to go and the vehicle is self-correcting or dynamically stable."
Carroll Smith - 'Tune To Win' - pg.62
To make things simple, take a look at these diagrams:
Forza Motorsports 3, toe-in explained
First of all, you'd never run this much toe in either direction, but we've got 4 degrees of toe-in just for demonstration purposes. Basically if you follow the dotted lines using the angles of the toed-in wheels, eventually they intersect at the vehicle's centerline. With toe-in, any disturbance via a bump or divot in the road surface will cause the vehicle to steer toward its center. These road surface irregularities cause a disturbance in the vehicle's steering which due to their abruptness in nature, require an immediate steering correction from the driver:
"But note that with this slight steering input, the rolling paths of the wheels still don't describe a turn. The wheels have absorbed the irregularity without significantly changing the direction of the vehicle. In this way, toe-in enhances straight-line stability."
'Smithees Race Car Technologies' http://www.ozebiz.com.au/racetech/theory/align.html
Forza Motorsports 3, toe-out explained
Now if we're running toe-out (as shown above) it's a completely different story. Granted it's a good situation for initiating turn in, but at high speeds, straight line stability can get a little tricky:
"If the car is set up with toe-out, however, the front wheels are aligned so that slight disturbances cause the wheel pair to assume rolling directions that do describe a turn. Any minute steering angle beyond the perfectly centered position will cause the inner wheel to steer in a tighter turn radius than the outer wheel. Thus, the car will always be trying to enter a turn, rather than maintaining a straight line of travel. So it's clear that toe-out encourages the initiation of a turn, while toe-in discourages it."
'Smithees Race Car Technologies' http://www.ozebiz.com.au/racetech/theory/align.html
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