The actual use of VPN technology is to create virtual networks that are private (hence the name). It's a system level technology. There are several types of network topologies you can set up, when I was learning about this I found this article which is quite nice: https://www.procustodibus.com/blog/2020/10/wireguard-topolog.... You can proxy traffic through a VPN, but the only scenario I can think of in which it makes sense is if you are an OSINT researcher and you need a safe system on which to conduct your research.
If you need to proxy traffic and "hide" your IP, just use a flipping proxy. It's an application level technology (e.g. for torrenting, every torrent client under the sun supports a SOCKS5 proxy). If you don't have the patience to set up a VPS yourself, you can even use something like Outline (https://getoutline.org) which automates that (and it has a mobile client app as well).
If you need privacy (and to actually hide your IP), then use Tor.
I think the reason why the method you mention isn't commonly used is that it is complicated to understand/set up and hard to verify.
I've seen more advanced users encapsulate everything in a VM so that non-VPN traffic can be blocked globally by the OS.