The man and his wife were taken by ambulance to the Wanaka Medical Centre, after the crash at the intersection of Ballantyne and Riverbank Rds about noon.
Nick Fisher (17), of Wanaka, who was driving north along Ballantyne Rd, said: "I reckon I'm pretty lucky to walk away without any injuries."
Mr Fisher's Subaru Legacy was badly damaged in the crash, and the passenger side of the retired couple's Nissan Bluebird was crumpled in the collision.
Emergency services worked at the site to free the elderly couple from the car and treat their injuries.
Constable Bruce McLean, of Wanaka, said it appeared the elderly man had failed to stop at the intersection.
"They're very lucky. In T-bone [car] crashes, it doesn't normally come out well," he said.
He said it was likely the driver would face a charge.
The elderly couple's pet Jack Russell terrier dog was killed in the car crash.
