The Scotland international has not featured for Villa since May 2012 and is currently training with the club's development squad.
Villa's belt-tightening regime is no secret, with Lambert operating under a tight budget since arriving in the midlands in the summer of 2012.
Hutton's unexplained absence has perplexed some observers, while Villa have been unable to offload the right-back apart from loan spells at Nottingham Forest and Real Mallorca.
Lambert has now revealed that Hutton's Villa career is essentially over because the club need to offload his reported £40,000 weekly salary.
Asked whether Hutton - who is still being selected by Scotland boss Gordon Strachan - has a chance of ever playing for Villa again, Lambert said: "I've had good conversations with Alan and in the games I've seen him play for Scotland he's done well.
"It would be unlikely that he would play. He knows that anyway. We haven't fallen out.
"We need to get the (wage) structure down to a level. There's never been any fall-out, I've actually tried to help him get a loan move.
"I've been to a couple of Scotland games and seen him do well. You'd think somebody would come in for him. The lad has to play."
Lambert admitted the situation is "more or less" purely down to money and concedes the situation needs to be resolved, with Hutton having another year to run on his deal after this season.
"I wouldn't have thought it could carry on for another 12 months, into next season," the manager said. "I wouldn't want that for him. We need someone to come in for him."