Swain said Mr Hansen showed up to his Akers Rd property in Linton, and two men arrived later.
Swain said he went away and came home as the two men were leaving, and saw Mr Hansen had left his ute there.
He said he moved the ute to the shed - starting it up with a nail file as the keys weren't in the ignition.
After discovering bloodstained keys under the seat and two cellphones belonging to Mr Hansen, Swain said he lifted the cover on the tray of the ute to find Mr Hansen's body.
"I seen Whetu lying in there ... he definitely wasn't breathing, mate. Wasn't breathing. And just lying, it was partially on him or just beside him, was - I thought it was a 22.
"Even though he says that in this business you live by the sword, die by the sword, hey, you never expect it because he's pretty good at handling himself."
He believed Mr Hansen had been killed over drugs, as he was a meth dealer.
He then went to visit a friend and tell him what had happened, and ask for advice. Swain hatched a plan to put the body into the 44-gallon drum and take it to the house of one of the men he'd seen with Mr Hansen.
He said he left the drum there with Mr Hansen's two cellphones on top of it.
"As far as my mind, they're the ones that have done it, so they can take care of the mess."
Swain would not say who the men were or the address he left the drum at, but said it was around the Foxton area.
"I've never narked on anybody ... if [the police] do their job properly they'll find out who they are. There's enough clues there.
"I'm not really on the best of terms with police," he said.
The court heard yesterday about Swain's previous convictions, which include bombing a Christchurch police station in 1991, kidnapping Crown witnesses at gunpoint, and burning their properties.
He also said there were explosives and a number of other items on the property he didn't want police to find, which was one of the reasons he didn't contact police.
He denied killing Mr Hansen.
"I most certainly did not. And I would never do that to a mate. Mates don't do that."
Swain told Crown prosecutor Ben Vanderkolk he didn't notice any blood in the cab of the ute when he moved it to the shed, and when he checked a second time for the keys.
Forensic scientist Janina Neale said on Thursday there were "numerous" bloodstains in the cab of the ute, consistent with someone sitting in the driver's seat being shot in the head or upper body.
Mr Vanderkolk said the court had heard five or six different versions of what happened, that Swain had told different witnesses.
He said Swain's story was a "complete concoction".
The trial, before Justice Brendan Brown, continues on Monday.