The cause of the fire is still unknown but Gardai are carrying out a full investigation into what sparked the blaze.
The fire broke out just before 3am at the house at Glenoughty Close at Glencar.
Members of the Gardai and the fire service rushed to the scene and brought the blaze under control.
People in the house had to flee as the car threatened to spread to the house.
A Garda spokesman confirmed the car has been removed for technical examination to determine if the fire was started maliciously.
One eye-witness told Donegaldaily “I was about to go to bed when I heard this commotion.
“The Garda and the fire brigade were already there and the car was ablaze.
“I don’t know how the blaze started but the people in the house had to get out because the flames were getting close to the garage.