The Government should have been told one of its departments decided to sell three-year-old BMWs and buy new ones, Prime Minister John Key says.

The Government has been criticised for selling the relatively new fleet of 34 luxury limos and replacing it with brand new BMWs in tough economic times.

The new cars sell commercially for about $200,000 each but the Government gets a discount for bulk buying. The actual cost is not being stated, for commercial reasons.

Internal Affairs had defended the sales saying they made good financial sense.

Mr Key revealed this afternoon that the Government was not kept in the loop about the decision. A six-year deal for the cars was signed by Labour with a three-year rollover clause.

"That decision to invoke that rollover and bring new cars in was made by the Department of Internal Affairs without reference either to their minister or to me," he said.

Mr Key found out about the new cars when one of the drivers told him last week.

The department did not think it had to check as it had authority from the former Labour Government.

"I can't take responsibility for a contract that was entered into by the previous Labour Government, that wasn't bought to my attention or to my ministers' attention," Mr Key said.

"I am surprised, I would've thought they (Internal Affairs) would have referenced it to us... politically we should have known about it, we didn't."

He said Internal Affairs did understand sensitivities about spending but felt they got a good deal.

Mr Key said it was too late to say whether his Government would have approved the purchase or not and the cars were due to arrive in New Zealand soon. They would not be returned because of the high cost that would incur.

A spokesman for Internal Affairs told NZPA there was no requirement to inform the Government about its decision to chose the option of buying new vehicles.

"It's our contract, we administer it. Our assessment was it was the best value for money to replace the vehicles now and we got a good deal in the first place and we got a good deal now," he said.

Had the cars been kept they would have lost value and the resale price would be considerably lower.

"The gap between the price of a new car and a second-hand one selling is greater so you are actually losing more money."

The value of the cars being sold was close to their purchase price and the Department said the contract offered the lowest annual operating costs of comparable cars due to fuel efficiency and tyre costs.

If they had decided to keep the cars and not buy new ones there would have been no penalty.

Earlier, Finance Minister Bill English when the contract came up for renewal the Government would see if there was a better deal and probably a "more mainstream model of car".

Green Party Co-leader Metiria Turei said the Government needed to release figures proving it was value for money given the extravagance of the cars and previous spending by Ministers on expenses.

- NZPA