Check out this awesome video of vehicle damage physics in the CryEngine 3. This is a work in development project.
The amazing soft-body physics you know from Rigs of Rods, now even better in CryEngine3. Anything can be built in the Beam physics system – cars, trucks, planes, boats, trains, cranes, tanks, helicopters, and even destructible map objects and crash test dummies. It’s all real physics. Anything is possible.