The paper describes a closed-loop vehicle simulation environment developed to support a virtual vehicle design and testing methodology, proposed for the University of Windsor Formula SAE team. Virtual prototyping and testing were achieved through co-simulation of Matlab/Simulink® and Carsim®. The development of the required hybrid-control driver and vehicle models are described. The proposed models were validated with in vehicle test data. The proposed methods have shown to be effective and robust in predicting driver response, while controlling the vehicle within the developed simulation environment.