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The woman, who spoke on condition her family was not identified, said she and her husband and two young children were asleep when she woke to groaning about 4.30am.
"I thought he must have been busy tinkering outside, he's usually up at that hour," she said.
"I looked out my bathroom window and everything was orange.
"I went down the hallway then and heard a huge explosion."
The woman grabbed her children, whose shared bedroom was closest to the fire, and moved them into the lounge while she and her husband went outside.
There she saw her father-in-law in flames and fire burning from the rear end of the Holden station wagon.
"He had kind of blacked out but hadn't fallen over.
"He was just standing there with the hose but wasn't putting it on anything. Then he started putting it on my car [parked nearby].
"It wasn't until ... I said 'Dad, you're on fire' that he must have clicked and started feeling all the pain. He was literally on fire," the woman said.
"It was horrible. His skin was coming off his face and neck."
The woman said the burns had penetrated deeply.
"They had broken right through his hands, right through the muscle. Fingers were dangling by their bones."
The husband used the hose to extinguish the flames coming off his father and brought him inside where he was put in a shower with cold water until emergency services arrived.
The woman said he had worn a merino singlet, which had not burned and which doctors said had saved him.
He was taken to Waikato Hospital in a critical condition but had surgery that night and later a skin grafting operation. He also suffered burning to his airway.
The woman said he had been working on the car as a project.
"He'd just put in new seats in it and new fabric and had just put in a fuel tank."
It is believed a dropped electronic light bulb might have ignited fuel vapours or a cigarette had been lit too close to the fuel pump.
