Robots were used to check the scene amid fears of further explosions in the normally quiet Truscott Road at suburban Enfield.
Police said the blast was strong enough to blow out windows of nearby homes and tore the roof and driver's side door from the vehicle.
Debris was thrown up to 50 metres while residents in the street reported their homes shaking.
Earlier, police said there was a criminal link to the explosion, reported ABC News.
Residents feared another blast
"At about 5.30 this morning we just heard a massive boom and the whole house just shook," a resident who gave his name as Neil told reporters.
"We really didn't know what to do, it was just so scary.
"We came outside and you could just see debris everywhere."
The man said police had told residents another explosion was feared.
He said he did not recognise the car involved.
Police said they believed the two people killed were inside the vehicle at the time of the blast.
They said there were no reports of other injuries.
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