There is one very important and unavoidable problem with sprites and 3D: the sprites always face the camera. This is not a problem with orthogonal 2D projection, since there is only one way the camera looks at. Everything is on one flat plane. But with a perspective projection the sprites start to look like they are always rotated to face the camera unless you take the time and draw multiple versions of the sprite from different angles. This is how Origin’s Wing Commander and Lucasarts’ Their Finest Hour work. But this takes a lot of effort and more importantly: it needs a lot of space for the sprites.
In Pico Racer, sprite perspective is handled so that most sprites (trees, warning signs) have no perspective. This works reasonably well due to two facts: the objects are two-dimensional (warning signs) AND they are always located to the sides so that the angle to them would be pretty much the same at all times. Only the player car and the opponent cars have visible perspective, since that’s what you look at the most. Also, the cars (especially the player car) have a lot of sideways motion which would immediately make the cars’ perspective look odd.
A static sprite, does not match with the road - not too convincing
Sprites change orientation, slightly better but looks wonky
Sprites change direction and front wheels move with respect to rear: smooth and still economical
The cars use two tricks to fake a convincing perspective: firstly, they have multiple versions of the sprites. Secondly, the cars are built of a number of separate sprites located at slightly different distances. I borrowed this idea from Lankhor’s Vroom and it works well with cars that have no flat sides and instead have clear “sections” – just like F1 cars have. The cars have the rear sprite, the front sprite and a middle section. When the car moves sideways, in addition to showing the sprite from an angle, the rear wheels have some sideways motion against with respect to the front wheels. And, while not a perspective thing, the front section is moved sideways when the player turns left or right, when the road has a curve or when the car bounces giving the illusion the car is yawing and pitching.