When Ted Russell Ford turned down Harrison Pang's leasing request for a 2009 Ford Focus, evidence of the lagging economy on of the most profitable businesses in this country became readily apparent.  

Car leasing, once a profitable business in the American automobile market, is now shrinking dramatically due to the faltering economy and fierce competition.

Like any other businesses that are affected by the current financial crisis, the contraction in car leasing is part of a chain reaction.

Credit is tight and expensive, and residuals are unpredictable. Chrysler Media ServiceThe problems for the car industry started when oil prices rapidly increased in recent years. And now, there is no trend of stabilized prices or signs of permanently declining fuel prices in the foreseeable future, despite the recent downswing in prices at the pump.

American automotive manufacturers have been hit the hardest by the increased prices, in part because many have a tradition of using huge, inefficient engines in their vehicles, unlike their foreign competitors.

While poor gas mileage was rarely considered a problem when people only had to pay a dollar or two for a gallon of gas before 2004, the more than doubling of gas prices in the U.S. has completely changed the market.

Recently, SUVs and trucks that typically have larger engines, have lost favor with buyers who have no need.

Consequently, the value of these gas-guzzlers declined more quickly that anticipated by automotive manufacturers, leaving lots full of new cars at dealerships with few prospective buyers.

This trend applies to both the new and used car industries. In the case of car leasing, it means a huge decline of the residual of American cars.

"The residual value of the car is never what it's supposed to be at the beginning of the term due to the market." Tim Heatherly, sales manager at Harry Lane Chrysler said.

'Residual Value' is how much a particular leased car is worth by the time it has been returned to the dealership. The dealer will profit again by selling the car if the value at the end of a lease is still high enough.

Pang, a UT graduate student and teaching assistant with strong credit history, found out first hand that he can no longer lease any car from Chrysler dealers because of unpredictable residual values.

Chrysler officially discontinued its leasing offer on Aug. 1; Ford and Dodge dealerships have also discontinued the leasing option for various models of cars in recent months.

With limited choices left for American cars, many consumers now turn to imported cars, though some customers like Pang see this time as an opportunity to make the most of a leasing contract. 

Pang is an international student studying media art at UT who works as a teaching associate in the UT School of Art. With a monthly stipend of $1,000, Pang could not spend too much on a car. When the contract ends two years later, I don't have to worry about how much money I can get for selling this car. I know it's not going to worth much. Harrison Pang, UT student.

"Leasing a Japanese car is really expensive compared with American car dealers' offer." Pang said. He also sees leasing as a better option than purchasing, especially for a student.

After two months of research, Pang found one car he likes at Ted Russell Ford that is still leasing--the 2009 model Ford Fusion SE. He quickly signed the contract and said he would not regret his decision as a customer, because he believes when his lease runs out two years from now there will be a better market for gas-efficient cars.

At a time when cars with larger engines are suffering from heavy depreciation of their residual value by the time they are returned, both the manufacturer and the dealership won't be able to profit when selling the vehicle secondhand.

For this reason, lenders have become more prudent when a leasing agreement is being signed, resulting in many rejections that depend on the car's brand and model.

Imported cars, especially Japanese cars, which are generally more fuel-efficient, haven't experienced the same drop-off in residual value yet. For them, leasing is still a rewarding field.

"Those cars (Japanese cars)...hold a better value than the domestic car does." Tim Heatherly, the sales manager at Harry Lane Chrysler said.

Some people believe it is only matter of time until the practice of car leasing becomes nothing but automobile history.

The entire automobile industry is transforming itself to be capable of adopting new energy efficient sources, such as electricity and bio fuel. Until then, many will not take the risk on big fuel-guzzling engines that already put a strain on the middle class.