Manawatu's rubbish will be dealt with by an Auckland company in a move the district council says makes financial sense.

Previously, Manawatu residents have had rubbish taken away by Palmerston North City Council and the Cairns Group, but that arrangement will end in November.

The seven-year contract worth $11.1 million has been won by Smart Environmental Ltd, the third-largest waste management company in New Zealand.

The company also has financial interests in landfills including Bonny Glen in Marton and will set up an office at the Manawatu Transfer Station.

It has cost Manawatu ratepayers $500,000 a year for the city council to run the collection of their rubbish.

The contract was extended last year for 12 months while the council reviewed the contract and decided whether it would prefer another service provider.

The council asked for expressions of interest earlier this year for the rubbish collection and disposal contract.

District council infrastructure group manager Hamish Waugh said seven expressions of interest were received, four of those were shortlisted and invited to tender for the contract.

Mr Waugh said Cairns Group, of which Cairns Transport and Manawatu Transfer Station are in receivership, did not tender for the contract.

He said the way the waste was dealt with and how much money the council would receive through recycling returns were factors in the final decision.

"While the winning tender was not the cheapest, there is the opportunity for the council to get a lot of money back through recycling."

A new recycling and rubbish collection system will start from November in urban areas and rural areas will come under the new system next July.

The new system of wheelie bins and recycling buckets for households was expected to encourage more recycling, which would create revenue for the council.

- © Fairfax NZ News