A decline in new U.S. car sales and used-car prices this year has made it harder for banks to make money on auto leases, prompting GE Capital Corp., Bank of America Corp., Bank One and other lenders to pull services from dealers, according to a Bloomberg News story by Jeff Green.

That means higher leasing costs for buyers who, small dealers say, will look for cheaper or used models, or lower rates offered by larger rivals.

Detroit's Big Three -- General Motors Corp., Ford Motor Co. and DaimlerChrysler AG, will have to consider price breaks on new cars to bolster sales as lease rates rise, according to National Automobile Dealers Association (NADA) economist Paul Taylor. "It's causing the perception of fewer options," he said.

U.S. automakers are already offering discounts as sales ease from a record pace last year in a slowing U.S. economy.

"The guy who had a $300 lease, heavily subsidized, on a Ford Explorer is now being asked to pay $450 to lease a new one," CNW Marketing/Research analyst Art Spinella said.

Meanwhile, financial institutions that no longer want to foot losses on leases are getting out of the auto leasing business. Bank of America, which has about 495,000 auto leases, said last week that it would stop that financing. National City Corp. quit leasing cars in December and KeyCorp exited in May. Bank One cut its leasing portfolio by almost $3 billion in the last year.

The value of auto leases written peaked in 1999 at $120.9 billion and will slide to about $116.1 billion this year, Spinella estimates. About 27.5 percent of all cars sold in the United States this year will be leased, down from a high of 29.6 percent in 1999.

And the situation isn't likely to get better for either auto dealers or car buyers, because banks that stay in the business are getting better at estimating residual car values and taking fewer risks, according to industry observers, who say payments will probably be higher no matter who finances the lease.

For dealers, the risks aren't distributed equally. Dealers in smaller markets are likely to face bigger challenges from the shortage of lenders because they already have fewer banks to draw from, according to Frank Ursomarso, owner of Union Park Automotive Group in Wilmington, Del.

But dealer Joe Shaker told Bloomberg News he sees the effect at his 10 dealerships throughout the Northeast. He loses sales if his lease rates are higher than those at the rival showroom down the street, and if those rates aren't in line with payments on a buyer's last car or truck.

"If it's $200 more than he was paying last time, we have an issue," said Shaker, whose Hometown dealerships sell 13 brands, including cars and trucks made by Toyota Motor Corp., Ford, DaimlerChrysler and General Motors.

Major automakers offer their own leases and financing through captive finance arms. Often the automakers will subsidize their finance units to help them offer lower rates than banks.

Those subsidies can get expensive. DaimlerChrysler took a $400-million charge in the third quarter of last year because of residual losses on expiring leases.

Wells Fargo & Co. and some other banks still are willing to take some of the risk, working with dealers on some sales -- often to consumers with lower credit ratings, Shaker said. When Chrysler dealers complained about fewer leasing options, the automaker teamed up with Chase Auto Finance Corp. to provide an alternative to DaimlerChrysler Services.

The automakers' captive finance units seem willing to pick up much of the slack as banks leave the field, a process that occurs "like clockwork" when the economy slows, according to Ford Motor Credit spokesman Dan Jarvis.

That will mean relying on subsidies from corporate parent Ford or even boosting rates if sales don't pick up -- in other words, acting like a bank.

No matter the changes, leasing will go on, with car buyers paying more and dealers working harder to find leasing rates for customers, Ursomarso said. "The auto companies are more than able to pick up the slack," he said. "Besides, these banks are walking away from one of the biggest segments in the business. They'll be back."