"I saw the car door open and heard a man yelling that his prosthetic leg was caught.
"He said the car was starting to go down and I yelled out 'we'll get you out, we'll get you out'."
Mr Townsend ditched his cellphone and dived into the lake fully clothed, swimming out to the car. He managed to free the man's leg and pull him free before the car sank about 20m off shore.
The pair made it to shore before emergency services arrived on the scene. Mr Townsend says the driver, a 48-year-old Tauranga man who was staying with friends, was shocked and cold and his prosthetic leg was a bit dented but he was otherwise unhurt.
Mr Townsend's daughter gave the man a hot drink and some dry clothes. With the help of a neighbour Mr Townsend went back into the lake and fixed a rope to the roof rack of the submerged car to stop it moving.
The driver of the car, who did not wish to be identified, said he was hugely grateful to Mr Townsend for saving him.
"He is an amazing man. He even tried to save the car afterwards and I would like to thank him very much."
Mr Townsend says no one was around when he initially saw the car go into the lake.
"I was having a cup of tea and just happened to look out. It was really freaky and all sorts of things go through your mind."
Taupo police Sergeant Steve Denny says Mr Townsend's prompt actions probably averted a tragic outcome.
"It's no exaggeration to say he probably saved the driver's life."
Mr Denny said police would not be taking any action against the driver.
The Lake Taupo harbourmaster was informed and a diver was brought in to help salvage the submerged vehicle.
Mr Townsend says apart from having elevated blood pressure, he suffered no consequences from his unexpected dip in the lake and rescue effort. The car driver was collected by friends and didn't require hospital treatment.
"We even shared a joke afterwards when I told him the good news is that we have the BMW dealership in Hawke's Bay!" said Mr Townsend.
