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After your car is damaged, press [Esc], then select the "Save And Exit" option. Reload the game at the main menu to restore your car.
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Avoiding the police
When being chased by the police, press [Esc], then select the "Save And Exit" option. Reload the game by selecting "Continue Game" at the main menu. You will be safe from the police and damage to your car will be removed.
When being chased by the police make sure to have stunts as they will give you $1,000 bonus for each stunt. Normally without a pursuit it is only worth $500.
When upgrading a car, start with the chassis and tires avoid ending up with a car that is difficult to control.