You have to choose the cars for the two player session from the memory card. I've played GT4 two player exactly once so I don't remember where the option is but my bet is to the right of the favourites list. In other words, the upper row (the names improvised as I really don't remember) would be "Alphabetical", "Era Specific", Favourites and then the memory card garage at the extreme right. It's somewhere there, explore a bit and you'll get it.