Lee Winyard, 41, told the High Court in Glasgow Philip Wade told him not to tell officers about seeing Wade or co-accused Colin Coats in the alleged victim's car.
The witness was giving evidence at the trial of Wade, 42, Coats, 42, David Parker, 38, and Paul Smith, 47, who deny abducting, torturing and murdering financial adviser Lynda Spence. Ms Spence, 27, has not been seen since April 13, 2011.
Mr Winyard said Wade and Coats were in a silver Vauxhall Astra on April 29, 2011 when they visited him in Tighnabruaich, Argyll, where he was staying in his caravan. Mr Winyard claims the men asked about going out on a boat, telling him they wanted to "get rid" of something.
Wade also said he had killed a man with a hammer and chopped him up, Mr Winyard said. The witness told Lesley Thomson, prosecuting, he believed he was being asked to help dispose of a body.
Mr Winyard said he later received a missing person flyer about Ms Spence which contained a picture of a silver Astra and a card from police at his home in Ayrshire. He approached Wade about it.
"(Wade) said 'That's the car we were down in Tighnabruaich in'," Mr Winyard told the court.
When Mr Winyard and Wade discussed the police, the witness claims the accused said to him: "Tell them we came and saw you but don't tell them about the car because Colin Coats will put a bullet in your head."
The witness, who has a five-year-old daughter, said he was in fear of his life and told jurors this was his reason for not initially telling police the truth.
Under cross-examination by Gary Allan QC, defending Wade, and Derek Ogg QC, representing Coats, Mr Winyard denied telling police "what they wanted to hear" to protect his own interests.
Mr Ogg put it to him officers lied about Mr Winyard's fingerprint being on Ms Spence's car to make him believe he would go to prison and his daughter would be taken into care if he did not co-operate. Mr Winyard said: "I had my daughter and myself to think about. I was looking after myself whatever you want to say."
The trial, before Lord Pentland, continues.