It's not that Stanford FCU doesn't have a shrinking field of membership to court. For more than 50 years, the credit union has served the Stanford University community and high net worth employees of businesses such as Google and other tech firms. Thornton said these groups have helped to build strong residential and commercial loan portfolios.

However, with new cars, area dealers are likely to have the best rates, Thornton said. With captive financing, members can potentially get 0% — an incentive the credit union, like many others, just could not compete against. Most members don't know that there may be some strings attached with that 0%. Stanford FCU is putting together a campaign to educate them on reading the fine print because, frankly, the cooperative wants to originate the loans. 

The credit union also has a buying service program that offers creditworthy members a prequalification check for financing at the dealerships. The problem has been capturing members before they arrive on the lot.

"It's hard to educate the member on this because you see rate and payment first," Thornton said.

Competing in the used car loan space has reaped more dividends for the credit union. There is no tier by duration and the members who seek out financing tend to more engaged, Thornton said. They're more profitable, have higher credit scores and consider Stanford FCU to be their primary financial institution. 

"These are loyal members. Our losses are minimal because of their credit worthiness," Thornton said. 

New competition aside, credit unions need to be prepared for meet the needs of those coming to them for auto financing, said Dave Colby, chief economist with CUNA Mutual Group.

"The lending arena is continuously evolving and anyone can make a profit on unmet consumer needs," he said. "To set the stage, A paper lending has become a pure commodity. Whoever's doing lending right can live on longer margins."

Years ago, Stanford FCU had an indirect lending program, Thornton said. The effort didn't produce fruit.

"We revved it up, made some fundamental mistakes and paid dearly," he recalled, saying loans were being made to people with very poor credit. 

When Joan Opp, the credit union's president/CEO, came aboard two years ago, there was a renewed effort to build more member loans, Thornton said. Prior to her arrival, the recession led to an exit from indirect lending. There was even discussion about getting out all forms of lending during the financially troubled years of 2008 and 2009, he added. While USDA loans were an asset within Stanford FCU's loan portfolio, the decision was made to divest because the average borrower's score was 740. Those high net worth members were likely candidates for other loans. While the auto lending space still contains traditional players, Colby said the winds are starting to shift.

"We're on the cusp of major changes. There are bits blowing around directed by software," Colby said. "You have credit unions, banks and other financial institutions. What about Google, Verizon and AT&T? What I'm afraid of is if some look at credit unions and banks versus a telecommunications consortium – they might go with the telecommunications consortium."