Terry, sending you very best wishes for Thursday and will be thinking of you on the day.
If at all possible, find somebody else to blame the sale of the car on: the doctor, the DVLA, the insurance company, a problem with the car, anything other than you. "I know you want to keep the car, and I'm sorry; however, the DVLA have revoked your license." Or whatever you think will work.
My mother has been in her care home for a year and a half now, but often when we take her out, she will say, I need to go to car shopping! (I think it's prompted by seeing cars in the parking lots and on the road-she likes to go for rides in the car.) I always say, of course we will go car shopping, but then I'll say, but let's have lunch first, or we need to get the groceries home before the ice cream melts, or I'm too tired to go today, or something like that, and she always agrees and it's forgotten in a few minutes. (I'm "lucky" that she has no short-term memory, in addition to her Alzheimer's.)
I don't think you're being cruel, you're being practical. However, as you know, dementia and logic are mutually exclusive and you likely won't be able to explain it to your sister or get her to "accept" it.
Best of luck to you.