Yep, that's Mixed 1 Route 2.
The problem with proxies is that they're basically a box shape and anything that's inside them can be made more rigid. Now if you consider that we can't separately define that this is a roll cage and this is a body panel you can probably see the problem; the car is just a one big object. There used to be a time when the roof (and mostly the whole interior of the car) didn't deform as much but that turned out to be a problem when rolling over or someone hitting your roof. The issue with the engine is pretty much the same, in case the engine stays intact there will be parts floating in the air and clipping like crazy once the car has deformed.
I think ultimately the problem is that in real life the car would not be going after a major crash, whereas in a game it wouldn't be much fun.