The Herald has learned the car involved in last night's blaze was derelict and did not have an engine.
It's understood that due to that, it has been ruled out as a cause of the fire.
However, the Herald understands aerosol cans were found in the wreckage and that one of the injured children admitted playing with a lighter.
A source said if the kids had been huffing gas, it could have caused a build up of gas in the car and ignited inside the car when the lighter was triggered.
Waikato Hospital's duty manager said all four children were in a stable condition.
"They are in a ward and will be going into theatre today to be cleaned up," he said.
The patients had burn injuries he said, but were none were seriously injured.
Fire safety officers and police would be investigating the cause of the blaze today.
A neighbour, who asked the Herald to remain anonymous, said she rushed to the property with her son when she saw "a whole heap of smoke" rising from behind the house.
She said by the time they arrived the entire car was in flames and two boys, who she thinks were aged about 13 and 15, were "badly burnt" on their arms and upper bodies.
"We were at the fence going 'hey bro, are you fellas alright' and [the older boy] walked to us and you could see he was in pain."
He had his shirt off and "his whole half of his arm up to the elbow, the skin was totally gone."
Skin on parts of his upper body were also burnt and he was bleeding.
"As soon as I saw the boy's arm I thought no, this is pretty bad," she said.
The boy, who had been wandering around the garden in shocked silence, asked her to call an ambulance so she sent her son back to their house to ring 111.
The boys' grandparents were desperately trying to get the fire under control, as the car let off several small explosions and a tree nearby in the garden caught fire too.
"The grandparents were telling them, 'get under the water, get under the water,' it was panic."
Both boys did as they were told and disappeared inside the house.
The grandparents live at the house and the boys stay with them from time to time, the neighbour said.
She said she thought they didn't realise how badly burnt the two boys were because they were so focused on putting the fire out with their garden hose while they waited for emergency services to arrive.
The neighbour said she didn't know for sure how the fire happened but she thinks the boys could have been playing with fuel or lighter fluid.
"The car was fully in flames by the time we got over there," she said.
There were a couple of small "booms" as the car burned but no one else was injured.
She said it was a scary situation but she stayed to make sure the boys' whanau was alright, only leaving once the ambulance arrived.
