Firefighters were called to the incident on the M6 southbound carriageway between J27 and J26 near Orrell at around 11am this morning (Sunday).
Crews closed all three lanes of the carriageway as smoke billowed out from the wreckage to prevent any collisions.
Crew manager Simon Connor, said: "I felt very sorry for the family involved.
"They were travelling from Preston to Wales for a holiday and everything was going great.
"The car started to lose power so the driver looked down at his dials and the service light had come on.
"As he was slowing down he noticed people were pointing at his engine - there were flames coming out of it."
The driver managed to pull onto the hard shoulder and got his wife and children out of the car just before the flames engulfed the vehicle.
"They have lost everything," said crew manager Connor. "By the time we got there the whole car was on fire.
"Even the kids laptop went up in flames.
"They had camping gear on the roof which had melted."
Police and Highway Patrol also attended the scene.
All lanes are now open and the wreckage has been cleared.