Post some pictures if got good ideas. Bough my house 2013 old house (1960s) have same problem. Mine has step up still cramp when cars inside. It's horrible plus im so short that the height of the shelf and rod that any clothed hanged hits the washing machine and i can't place above machine since i struggle reach for it. My dryer on other side garage. Design so off. Hope your dilemma was fixed. Mine just begun.

I agree with dry walling but believe me you will want to insulate. Also add cabinets with a nice counter top so that when you have parties you can use the space to serve drinks or serve appetizers. To add hidden ambiance install some nice lighting. Also, install a pull down table that is secured to the wall that you can pull down to fold laundry or use for your parties. Finish off the floors in something with a dual purpose for auto use and dancing. Sounds like a great project. Have fun.