A method for determining potential collision includes capturing image data of an exterior environment ahead of a subject vehicle via a camera disposed at the subject vehicle. The presence of a leading vehicle ahead of the equipped vehicle is determined via image processing of captured image data. A time to collision to the leading vehicle is determined via image processing of captured image data. A determination, via image processing of captured image data, is made if a brake light of the leading vehicle is illuminated. Based at least in part on the determined time to collision and determination that the brake light of the leading vehicle is illuminated, at least one of (i) a degree of warning to a driver of the subject vehicle is determined and (ii) a braking level of the subject vehicle to mitigate collision with the leading vehicle is determined.