A Melbourne man accused of slitting his drug dealer's throat in the back of a car confessed the crime to a friend and then threatened to kill his mate's family if he dobbed, a court has been told.

A witness choked back tears in a Melbourne court room on Thursday as he described how alleged killer Christopher Lavery told him how he murdered 24-year-old James Russouw.

Mr Lavery, 31, is standing trial for the murder after Mr Russouw was found dead in his torched Jeep, with a knife sticking out of his neck, beside a suburban sports oval in Burwood East in March 2008.

The man, who can only be identified as "Witness A", told the Supreme Court of Victoria on Thursday that Mr Lavery threatened to kill him and his family if he told anyone.

Mr Lavery had asked him to go to the movies with him to see Rambo at Forest Hill Chase shopping centre in exchange for $150, the witness added.

Ten minutes into the movie, the two men exchanged clothes, with Mr Lavery leaving about half an hour after that, 'Witness A's evidence continued.

Mr Lavery instructed him that if he did not return before the end of the film, to leave the cinema via a certain route with his head down.

Witness A said when the two men reunited, Mr Lavery was wearing different clothes and that the pair went to a dumpster at Blackburn to dispose of Witness A's clothes.

He said when news broke on the television about Mr Russouw's death, the atmosphere at Mr Lavery's home – a unit where much of the friendship group would socialise – was "very sombre, very sad".

"After everyone left, Chris pulled me aside, gave me $150 ... and said 'you know what I did, don't you'?" Witness A told the court through tears.

"He said 'I set up a deal, sat in the back of the car and slit his throat, and if you ever tell anyone I'll kill you and your family'."

Another witness on Thursday told the Supreme Court of Victoria trial that before the murder, Mr Lavery had built up a $19,000 gambling debt.

The man, Patrick Douglas, said he had witnessed Mr Lavery putting a "ludicrous" amount of money into pokie machines.

The hearing continues.

AAP