There are stricter conditions for patients in a dementia unit but Mrs Luo did not fit those criteria.
Speaking through an interpreter, Mrs Luo's husband, Ri Dong Liu, and their three sons, Chi Hong Lao, Sui Xiong Liu and Guo Xiong Liu, said the family were extremely distressed.
"We feel very upset that her life was taken this way and we just feel hopeless," Mr Luo said.
The family say they had repeatedly warned the home about Mrs Luo's history and believe her death could have been prevented. "We strictly told the employees there, many times, to never let her out by herself - they all know," said one of Mrs Luo's grandchildren, Emily Liu.
Avonlea owner Steven Tan said the family's wish to effectively keep their grandmother from going outside was something staff simply were not allowed, under law, to do.
"Under the care plan and assessment, she's free to go outside ... and she's allowed to go out. She went out regularly. We can't be 100 per cent sure that no one will get into an accident - even at a rest home. We don't have the right to lock her up."
Mrs Luo was hit on July 31 while walking along Pah Rd in Epsom. She suffered a cracked hip in the accident and doctors could not operate because of her age. She died two days before her 89th birthday.
Mr Tan said the accident had been upsetting for staff and residents and as a result, residents had all undergone a road safety course.
On the day of the accident, Mr Tan said he had been driving back to the home when he came across emergency services near the intersection of Orakau Ave and Pah Rd.
It was only later, when staff realised Mrs Luo had been gone for more than an hour, that he contacted Auckland City Hospital to ask whether anyone fitting her description had been brought in.
After being told of her condition, he tried calling her sons but got no answer, so sent them a text message.
The family from China have lived in New Zealand for almost 20 years.
Police are still investigating the accident and no charges have been laid against the driver of the vehicle.
They could not comment further but said they were still appealing for any witnesses to the crash to come forward. Anyone with information is asked to contact Constable Gareth Davis on (09) 359-3116.