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Taken from here:
http://www.ozebiz.com.au/racetech/theory/align.html
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When the wheel on one side of the car encounters a disturbance, that wheel is pulled rearward about its steering axis.
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This action also pulls the other wheel in the same steering direction.
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If it's a minor disturbance, the disturbed wheel will steer only a small amount, perhaps so that it's rolling straight ahead instead of toed-in slightly.
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But note that with this slight steering input, the rolling paths of the wheels still don't describe a turn.
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The wheels have absorbed the irregularity without significantly changing the direction of the vehicle.
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In this way, toe-in enhances straight-line stability.
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If the car is set up with toe-out, however, the front wheels are aligned so that slight disturbances cause the wheel pair to assume rolling directions that do describe a turn.
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Any minute steering angle beyond the perfectly centered position will cause the inner wheel to steer in a tighter turn radius than the outer wheel.
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Thus, the car will always be trying to enter a turn, rather than maintaining a straight line of travel.
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So it's clear that toe-out encourages the initiation of a turn, while toe-in discourages it.
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The racecar engineer who corner weighted and aligned my car the
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(old fashioned way) explained it to me like this:
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With front toe out, as you turn the steering wheel the inside wheel, which is pointing slightly more into the turn, gives you the initial response.
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However the weight then moves to the outside wheel which isn't pointed so much into the corner, causing your turning radius to widen.
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Conversely with toe-in, the initial turn in isn't as good but as the weight transfers to the outside wheel the turn radius gets tighter as the outside wheel is pointed more into the corner.
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Regarding rear toe:
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Toe settings at the rear have essentially the same effect on wear, directional stability and turn-in as they do on the front.
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However, it is rare to set up a rear-drive race car toed out in the rear, since doing so causes excessive oversteer, particularly when power is applied.
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I must admit, I love having gentle front toe-out as it brings the car alive
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- but combined with camber, it does make it wander a little over uneven roads and the tramlines on motorway slow lanes.
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I'd never even consider as aggressive a setup on my BMW daily drive!! I guess you pay your money and take your choice really
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