Would he maybe understand if you explained it as being a bit like someone with epilepsy: that person isn't a bad driver in any way but unfortunately a seizure could happen without warning at any time so it isn't safe for them to drive.I would find this easier if there had been an incident like the roundabout one. There has been no evidence of any driving mistakes in my father's case. I have not let him drive me for some months so have not been able to assess for myself. This makes it even harder to get him to accept that his diagnosis means giving up driving. He thinks he is just normally forgetful for a man of 90, but actually his short term memory is now very bad. I have not found a good explanation of why dementia affects driving that a non-scientist can understand although it seems obvious to me that a PWD could not cope with a driving emergency.
The other thing is that some people with dementia do continue driving. If I remember rightly from when this question has come up before, they can do a driving assessment to prove capability and get a license that is renewed yearly. My details here are probably somewhat inaccurate but could you look into that, by way of offering your dad a 'lifeline'?