Various HILS systems for developing and testing vehicle mechatronic systems have been proposed and constructed during the last few years. However, performance of those systems have not been evaluated in a systematic way. Based on the transfer function approach, this paper presents a method far evaluating performance such as stable dynamic simulation range of a proposed steering HILS system. In the evaluation, we have investigated effects of time delays that exist in the real-time dynamic simulation, additional actuators, and data transmission on the stable dynamic simulation range, simulation frequency range, and steering feel. This evaluation methodology may be useful to help engineers develop a HILS system for their own purposes.