If you are playing on PC using the Xenia Canary emulator , simply having the Disc 2 ISO file in your folder isn't enough. You must manually "install" the content into the emulator's virtual hard drive.
If you get this when trying to install, it means you are using the dashboard installer instead of the in-game menu installer. Cars still locked: Ensure the files were placed in the correct folder within Menu cutoff: Forza Motorsport 4 Disc 2 Iso