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Nearby resident Abbey Reid was woken by the crash between a late-model car and a rubbish truck close to a sharp bend in King Edward St, near the Kensington Hotel, about 3.30am on Saturday.
"We heard a big bang," Ms Reid said.
"It wasn’t a massive bang."
Ms Reid (21), an off-duty bakery manager, saw the truck driver unsuccessfully try to put out the fire shortly after what appeared to be a head-on crash between the south-bound car and the north-bound truck.
After the fire began, it quickly intensified, she said.
It is understood initial efforts to put the fire out had to be abandoned because of the size of the fire and the risk of explosion.
"The fire just got too big," she said.
"It was one of the most dramatic things I’ve ever seen," she said.
"I was so scared."
After hearing the crash she and her partner had got up to help, and she had immediately called emergency services.
A police spokeswoman said the car driver and another occupant of the car died at the scene.
The surviving occupant of the car had serious injuries, and the truck driver had moderate injuries. Both were taken to Dunedin Hospital by ambulance.
The driver was discharged from hospital later on Saturday.
Ms Reid said when the injured passenger got out of the car he had "blood all over his face".
He had sought help and had been given a glass of water, she said.
"It was all over very quickly," she said.
She had never experienced anything like the crash and had been unable to sleep afterwards.
The crash had later brought home to her the realities of the road toll, and had continued to affect her.
"It was a bit scary this morning," she said.
Police said they were continuing to investigate the cause of the crash.
Because of the condition of the victims’ bodies, specialist staff were helping to identify them, the police spokeswoman said.
For that reason, formal identification of the victims could take some time, she said.
The police Serious Crash Unit was notified and the circumstances of the crash were being investigated, police said.