The pickings are slim for racing games right now,PGR3 and Moto GP 06 are my favs on the 360,but with Nascar 08,Forza 2,DIRT,Moto GP 07,Juiced 2 and PGR4 all on the way in the future there will lots more to check out.
You can get the first Forza game (used) for around 7-8 dollars at your local game store. In my opinion, it is tied for the best racing game with Moto GP '06. Hopefully Forza 2 and Moto GP '07 will take their respective places...
Burnout Revenge, man! That game is unbelievably fun and under $20! If you want more realistic racing and actual cars, though, PGR3 and Forza 2 are good bets. I like NFS:MW as well, but only for the police chases.
It depends on what kind of racing fan you are. If you like the simulation/arcade style racing then look towards need for speed. NFS:Carbon is a night based racing game while Most Wanted is during the day, so depending on your preference you have those choices. Now if you're into more life-like physics then PGR 3 is your best choice hands down.
If you are looking for a street racer then definitely one of the need for speed games but if you want one more realistic then definitely test drive unlimited or PGR 3
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