Although there has been a growing literature on cooperative diversity, the current literature is mainly limited to Rayleigh fading channel model which typically assumes a wireless communication scenario with a stationary base station antenna above roof-top level and a mobile station at street level. In this paper, we investigate cooperative diversity for inter-vehicular communication based on cascaded Rayleigh fading. This channel model provides a realistic description of inter-vehicular channel where two or more independent Rayleigh fading processes are assumed to be generated by independent groups of scatterers around the two mobile terminals. We investigate the performance of amplify-and-forward relaying for an inter-vehicular cooperative scheme assisted by a road-side access point which acts as a relay. Our diversity analysis reveals that the cooperative scheme is able to extract the full distributed spatial diversity. We further formulate a power allocation problem for the considered scheme to optimize the power allocated to broadcasting and relaying phases. Performance gains up to 2.8 dB are observed through optimum power allocation depending on the relay location.