If something seems too good to be true…maybe it is. Yet for the last two decades, automakers have swallowed a bit of pixie dust (or was that electric Kool-Aid?) and convinced themselves the lease is the industry’s best friend.

There seemed to be plenty of reasons why automakers and auto buyers alike loved leasing. You, as a car-buying consumer, might have used a lease to buy a fully loaded luxury SUV on a monthly budget more suited to a mainstream sedan. Perhaps you got your teenage child a brand-new car, instead of a rusty heap from the corner used car lot.

Automakers not only got buyers who might not have been able to afford a new car, but millions more motorists moved up-market. And, contended the early lease proponents, brand loyalty would surge, as well. Why? Because a manufacturer would know precisely when a customer would be required to turn in their vehicle, explained former Ford marketing czar Bob Rewey. And if you knew that, you could ramp up your marketing efforts, targeting a specific customer more effectively than ever before.

So it worked – in theory. But there was a catch.

Leasing has actually been around for decades. But in the past, it was “open ended.” That meant that a consumer never really knew what the final costs of the deal might be. Let’s say you leased a Ford Explorer and it’s come time to turn it in. With an open-ended lease, if the value of that vehicle has dropped since the deal was written, you might have cover the gap – much as you’d lose out if you bought a car that dropped more than anticipated when you traded in.

With today’s closed-end leases, however, the manufacturer assumes that risk. And knowingly so. In recent years, automakers have taken a “let’s pretend” approach to residual value, the technical term for what a vehicle is worth at the end of the lease. Sometimes they consciously inflate that number, and count it as an incentive – sort of the lease alternative to a rebate. Other times they simply ignore facts and come up with a number that they should know better than writing into a contract.

Either way, the lease bubble has burst. The residuals forecast for SUVs and light trucks, in particular, are coming in nowhere near what was predicted just a couple years ago. Add a rising number of defaults, and you have a full-fledged mess, one that will cost the industry billions, considering that leases currently account for 20 percent of new-vehicle business among Detroit Big Three. (And for some import luxury marques, it’s substantially higher.)

If you thought the industry was worried about the general downturn in the U.S. auto market, add in the leasing situation and you’re starting to see signs of panic.

This past week, Chrysler announced that its captive financial subsidiary will halt automotive leasing. Now, Ford and General Motors plan to sharply trim back their leasing programs. And a number of banks, including J.P. Morgan Chase’s Chase Auto Finance unit, are scaling back or are cutting leasing out, as well.

Who loses? That’s a good question. Certainly, there’ll be a lot of consumers forced to downsize their aspirations. And plenty of others might be driven out of the new vehicle market entirely. For manufacturers, that’s lost business and lowered expectations, as it’s another reason why the ongoing market slump might continue.

And you think you've seen gas prices soar? Try renting a car, these days, as I do, during some of my travels, despite all the press cars I review, while on the road.

Rates have been rising fast, I've found, in places ranging from Newark, New Jersey, to Los Angeles, as well as Nashville and other points in between. Nail Abrams, a rental car consultant with Abrams Consulting Group, echoes that finding, using a proprietary tracking system his firm has developed.

Need a mid-size sedan for a quick business trip? Expect to shell out $82 a day, up from $62 a year ago. Meanwhile, week-long rates have also shot up, though not nearly as much.

Why the high prices? Costs are going up, starting with a rental firm's primary product, the car itself. Manufacturers like Ford and General Motors have been slashing back their production for fleet customers, particularly those daily rental companies. For one thing, they don't make much - if any - money on those sales, and the cheapo versions dumped into fleets can hurt, rather than help, a product's public image. But other costs, from manpower to maintenance, are soaring, as well.

So, what's a traveler to do? The first rule is to shop around. On one of my own recent sojourns, I found my options ranged from as little as $40 a day to more than $80, and all for the same class of car. It's not just who you rent from, but where. Turn to a rental company that has a location right on airport property and you may get socked with hidden fees that will drive up your final price sharply. You could get a much better deal going to an alternate location, say in downtown Newark, rather than at the airport, and it could more than cover the cost of a cab, just for one day.

Check for hidden deals online or specials offered through various organizations you belong to, such as AAA or AARP. And you can play one rental company off another. I prefer one brand, which gives me good frequent-user credits. But it's a bit costlier, so I usually check the competition, first, then ask my preferred vendor to match any better rate. Often, they will, or they might throw in some perk, like a larger car or free use of a portable navigation system.

Be absolutely clear if you accept any options, like that navi system, or even sign for an extra driver. If you're absolutely the only one who'll get behind the wheel, why add to your costs by signing up your spouse or business partner? And check with both your credit card company (or companies) and your personal or corporate car insurance agent. Rental firms make millions selling expensive insurance riders to customers who actually should have coverage already.

Finally, check the options for fuel. You can get seriously burned by a rental car company if you don't bring back your car with a full tank - unless you've signed on for some other arrangement. Some firms will pre-charge you for a full tank. Others have deals that charge a set price, per gallon, if you use the car for just short runs, say 50 or 75 miles. And a few rental firms are now promising to charge local market rates, rather than exorbitant premiums - which we've seen run as high as $9 a gallon, in some locations.

Consider how much driving you'll do - but also whether you'll want to stop and gas up before rushing back, frantically hoping to make your flight.

There's no escaping the fact that car rental costs are rising. But you can minimize the impact if you take some to prepare and think through your plans.

With all the news coming out of yesterday's big General Motors news conference, at least one significant topic managed to slip under the radar. And it leaves us wondering whether the increasingly downsized giant of an automaker will be walking away from its long-standing involvement in motorsports.

GM has traditionally been one of the most aggressive players in the global racing world, participating in series ranging from the NASCAR good ol' boy circuit to the sophisticated world of Le Mans endurance racing. But consider a comment made to employees by CEO Rick Wagoner:

"We will implement significant reductions in promotional and event budgets, motor sports activities and back-office expenses," said the CEO.

Considering GM is looking for ways to slash a hefty $10 billion in expenses by the end of 2009, it's not surprising that it might target the healthy motorsports budget. The latest turnaround plan has the automaker questioning just about every line item. For example, if GM traditionally exhibits 20 cars at its booth at the annual SEMA Show (the yearly gathering of the Specialty Equipment Marketers Association), might it be just as effective to bring 10 or even 5, asked Troy Clarke, president of GM's North American operations.

There's more than just budget cutting at work, however. Even if the automaker could dump as much money as it has in marketing and motorsports, Clarke said it would no longer be business as usual.

Consider two of GM's biggest success stories of this past year, the Chevrolet Malibu and Cadillac CTS. The automaker trimmed back on TV and other, traditional ad venues, using Internet, viral, and other marketing efforts that, Clarke explained, show "how we plan to go to market in the future."

And so, when it comes to racing, running an otherwise identical "race car of the future" with Chevy decals around Talladega just might not make as much sense anymore as it did in years past.

Few expect GM to drive away from racing entirely, but we could see a sharp cutback. And it could be echoed in reduced support for other sports sponsorships, such as Major League Baseball and professional golf, where Tiger Woods has become more recognizable as a symbol for Buick than the brand's own cars.

Barely a month after announcing massive cuts, notably on the truck side of the business, General Motors today revealed a new plan aimed at coping with the "dramatic" rise in fuel prices and the steady downturn in the American auto market.

The numerous steps outlined by GM CEO Rick Wagoner at the ailing automaker's Detroit headquarters include further cuts in light truck production, a 20 percent reduction in white-collar costs - which will lead to the elimination of thousands of salaried jobs - the elimination of health care coverage for retirees over the age of 65, and other steps meant to save $10 billion by the end of 2009.

GM will meanwhile attempt to line up additional capital worth about $5 billion, though that may require borrowing against real estate and other assets, including stock in its generally more profitable overseas subsidiaries.

On the positive side, Wagoner and other senior GM managers insisted that they have "protected" the company's product program. That doesn't mean it will be business as usual in GM's design and engineering studios, however. After years of building up its portfolio of pickups, SUVs, and other light trucks, GM will put the focus on small cars, crossovers, and "green" technology so that the company's lineup, said "car czar" Bob Lutz, will soon look "more European...than ever before in our history."

But for now, GM has to make sure it has a history, and Wagoner told GM employees that, "Our goal is not just to change GM's bottom line from red to black, but to change GM for the long-haul."

The hastily announced news conference reflects the speed at which things in the auto industry have been changing. Barely a month ago, GM felt that the previous cuts it had announced would hold things over. But last month, the automaker suffered a sharp downturn in overall sales - as did virtually all manufacturers, including Asian giant Toyota. From an annual peak of more than 17 million vehicles earlier this decade, the annualized rate of sales in June tumbled to just 13.6 million. While most observers expect some rebound, GM's latest planning is based on the likelihood that oil will remain in the $150-a-barrel range and that U.S. car sales will linger around 14 million through the end of 2009.

Most of that decline has come in the light truck column. If anything, noted Wagoner's second-in-command, Fritz Henderson, there's actually a shortage of the smaller, fuel-efficient passenger cars that are suddenly in vogue.

A significant element in the latest turnaround plan is the elimination of another 150,000 units of light truck capacity. On top of that, GM will speed up the elimination of 150,000 units of truck capacity originally announced in June.

Such cuts will likely lead to further job losses on the hourly side of the GM workforce, though company officials declined to go into specifics. They've already completed nearly 20,000 union buyouts since the beginning of the year.

What's also unclear is precisely how many salaried jobs will be lost, though the ultimate figure is likely to reflect the planned, 20 percent reduction in white-collar costs. That's even more severe than the 15 percent cut announced earlier this year by Ford Motor Co. Wagoner said he believes that "most" or all the latest cuts can be achieved through voluntary buyouts.

Many of these announcements had been anticipated, but one of the big surprises came with news GM would phase out health care for retirees over 65, who would be eligible for government medical coverage. The septuagenarian Lutz noted that GM will increase salaried worker pension payments to help offset some of the added medical costs, though it is clear retirees will have to reach into their own pockets for some new costs.

Several other questions remained unanswered during the Tuesday news conference. GM officials declined to update what will happen with the moribund Hummer brand, an icon of the automaker's long focus on big, fuel-guzzling trucks. Last month, the company said it would consist options including the sale or closure of Hummer, but while Wagoner noted there has been "a lot of interest," he declined to offer any other news.

Hoping to put a more positive spin on the Tuesday morning news, GM officials gave reporters a taste of some future product programs, starting with the Chevrolet Cruze, which will replace the division's current compact sedan, the Cobalt, starting in 2010. According to Lutz, Cruze will be offered with a new, turbocharged I-4 engine that will boost its mileage by as much as 9 mpg. That, the company hopes, will make it, by far, the most fuel-efficient nonhybrid model in its class.

The automaker also showed the CTS Sportwagon, a Euro-styled version of the popular Cadillac CTS sedan. And it announced formal approval of the sporty CTS Coupe, which will reach market by the summer of 2009.

There has been some speculation that the U.S. market should revert back to a more truck-based model, should gasoline prices drop much below $4 a gallon. But Henderson said that the shift to small cars and downsized crossover vehicles should be seen as "being permanent."

Lutz stressed that a critical goal of the latest turnaround plan is to "safeguard" GM's product development program. Without new models, he emphasized, there's no way to recover. But the products of the future will be markedly different from what customers have come to expect. Significantly, 11 of 13 new products launching this year will be either passenger cars or crossovers, with those higher-mileage designs accounting for 18 of 19 products coming next year.

Skeptics have raised concerns about this paradigm shift. Over the years, General Motors has struggled to make money on passenger cars, especially going up against the likes of Toyota and Honda, who dominate the sedan market these days.

But there have been positive signs, including the strong demand for the Cadillac CTS and the sold-out Chevrolet Malibu. Notably, the average transaction price - what customers actually pay, as opposed to sticker price - has gone up $4,000 on the Chevy, this year, and $8,000 for the Caddy sedan.

Consumers are willing to pay significantly more for desirable small cars, in Europe, noted Lutz, as there's less of a link between size and price. As the American market evolves to a more European model here, GM is betting the same shift in pricing will take place.

Looking at the harsh cuts he'd approved, CEO Wagoner insisted, "Our plan is not a plan to survive. It is a plan to win." The question is whether consumers and investors will prove anywhere near as optimistic.

GM stock, which had fallen to another low on Monday, began the day with a modest rebound, but then started to slip once more. But Lutz downplayed the ongoing rumors of a GM bankruptcy. Noting he has survived numerous such rumors during a more than 50-year industry career, he suggested that analysts forget that "car companies don't die that fast."

As for consumers, their views will become visible as industry observers tally sales numbers for July and the months to come.

Toyota's Prius hybrid is already a hit with environmentally minded consumers, a fact that has driven the gasoline-electric sedan to the top of the green machine sales charts. But now, the Japanese maker hopes to expand the appeal of Prius by making it even greener.

The Japanese business publication Nikkei reports that some versions of the hybrid will be equipped with solar panels capable of generating as much as 5 kilowatts of electricity, starting next year. That would be enough, according to the paper, to power the hybrid's air conditioning system. That's a significant step, as A/C is a major power drain, particularly if the Prius is operating in battery power, rather than using its internal combustion engine.

The Prius is just the most visible of Toyota's expanding lineup of hybrids, with the automaker promising to offer gas-electric powertrains on virtually all of its product lines by late next decade. It is also developing a so-called plug-in hybrid version of the Prius, which would be able to charge a larger pack of lithium-ion batteries by plugging into the household power grid.

While the sun-powered A/C system - which reportedly will debut next May - is the largest automotive application of solar power, it's not the only one. Several makers, including Mazda, have used solar cells in the past to run vent fans designed to keep a vehicle relatively cool while parked.