How to take a car that makes a race challenging?

My gut response, based mainly on my many hours with GT3, is that you need to really learn the tracks. I mean really learn them, like a real race driver would. Identify corners you're slow on and fix them. If you can race against your own ghost replay, do that. If there's a whole track lap license for a track you're racing on, can you get a gold trophy on it?

You might feel that winning is impossible with your car, but it might not be. If the car has the power to keep up with the other cars on the straight at the start of the race, you can probably win the race through sheer skill and track knowledge. Work hard, and you'll get there.

Also, try the races that only allow a small number of car models, or ideally, one type of car. This helps to level the playing field, as long as you resist the urge to upgrade parts and instead work on your track knowledge.

EDIT : In GT5 each race menu provides a list of the "typical" cars you'll be racing against, and their power rating. This can help you to choose a similar car, if that's what you're after.