16 and no self-control
Take it off the road and make it a weekend straight-line car.
This way, you get to work on it with your son, he can still enjoy the car but the dangers and temptations of street racing are eliminated.
Frankly, your son proved beyond a doubt that he is too immature for this car on the street. Yes, the ricer challenged him but he could have said 'no', but didn't. Now, he has to pay a price. That's real life; actions have consequences. Often unpleasant. Lesson learned?
Frankly, 16 is very young for a modified Mustang and 16 is also very young to expect an adult level of maturity when tempted by another teenager wanting to race.
Some adult judgement was needed here, too. As it stands, the car is damaged, your son has legal problems and making the 'Stang a track car is probably the best compromise you can strike, in my opinion.
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