Firefighters were called to the Fern Place home about 4pm after neighbours spotted smoke rising from the backyard.

Albury Civic Fire Brigade deputy captain Peter Ryan said the unused Holden Commodore, its engine pulled out of its hood, was well alight when his crew arrived.

He said the fire, which was put out within 10 minutes, destroyed the car.

Police arrived a short time later to begin inquiries into who was responsible for setting the car alight.

The residents of the home were not home, but neighbours said they had seen a Ford take off from there at the time of the fire.

Another neighbour, who did not want to be named, said he saw plumes of smoke wafting from the yard and went to the house to help.

He said he connected a hose to a tap to try to stall the fire, but his efforts were foiled when no water came out of the tap.

It was the second car fire on New Year’s Day that Albury police are investigating.

A Ford Econovan was set alight in Birdwood Avenue, Corowa at 3am yesterday.

Corowa fire brigade attended and put the fire out.

Inspector David Cottee said it appeared that a jacket in the passenger side of the car had been set alight and left on the passenger seat causing fire damage to the seat and the car.

Anyone with information should phone Crime Stoppers on 1800 333 000.