I'm really conflicted about LFS level system. On the one hand I can appreciate the server/admin not allowing inexperienced drivers from potentially ruining races for the more experienced ones.
In my case though, it represents a rather frustrating and 'vicious' cycle.
I have not run LFS very much since my initial purchase years ago because every time I click to join an online session, it tells me I don't have enough points to do so. I can only spectate. I don't want to do that.
As a very respectful sim racer (I obey blue flags, no ramming etc...)
I'm then forced to exit that session, then log into another....driving some under-powered and rather boring econobox.
That session holds my interest for all of about one minute before I log off completely and boot up RACE07, GTR2, rFactor or NKP.
The end result is I never 'level' to a higher rank and the cycle continues all over again. I wish there were some way to unlock all cars for offline only racing against the AI...even if a verification tool limited their use online to a players actual rank.
As good as LFS2 is...and what little I've seen is good, it really represents a waste of money in my case.

By default, you can use all cars offline and online, the only thing that stops you is your actual purchased S1/S2 license (S1 some cars, S2 all cars at the time of posting) or the car choice set by the server admin of a particular server.

The online license levels are a server-side mod, and not all servers use it.

I've never ran into this problem myself.

LFS itself has no lever system,it's just servers,who are using such,don't like it,go in another server,sounds easy,huh? But I know the problem - these days there aren't too much well populated servers around,where you can do just some pick up racing with any car you want... But - if you're interested in some league racing,check leagues and events section lower in this forum.

Quote from Saabjock :

I wish there were some way to unlock all cars for offline only racing against the AI...

Hi, first of all - you should be able to use all cars offline (in Single Player and Hotlap modes).

The LFS "level system" is a 3rd-party application. It has nothing to do with developers of LFS. But a number of server admins are using this tool to filter out inexperienced drivers. As Bean0 said, not all servers use this.

Specifically which types of cars are you interested in racing? Maybe if you let us know we'll be able to point out a few servers that dont have the filtering in place.

Server with a lot of restriction are a pain for casual drivers.
Host your own, call a couple of friends and enjoy!

For racers who race daily the level system works great
and gives something to aim for.

But dont dispair. Maybe in year .. or two we can all start from 0 when we get new tyre physics

y u no stop joining stupid cruise servers?

As already mention by the others, the level system seen on servers these days is from third party server-addons, namely Airio. Airio uses some data from LFSworld.net (if you have allowed the data to be shared) aswell as gathering and storing its own data from sessions raced on Airio powered servers.

Your Airio level/rank is divided in two: Globally and host specific points.
The global points is the LFS Experience Index (LFSEI). Any other rank or level/points systems you see online is host specific.
For instance, if you race alot on one specific server, you gain some LFSEI, and some host specific points. If you connect to another server, your LFSEI will follow you there, but you start from scratch gathering any host specific points.

PS. If you have disabled data sharing in your LFSworld profile, these data won't be available to Airio, and your level/rank might be lower than it should be.