First, what is a “Core”?
In the simplest terms, a “core” is an old, broken auto part that you have replaced with a new or rebuilt unit.
When you buy a replacement for an ailing part for your vehicle, the seller will often charge you an up-front “core fee” on top of the purchase price of the replacement part. This is essentially a forced deposit you are making on your promise to later send in the broken part so that the seller, or more accurately its supplier, can rebuild it for further resale to a downstream customer.
Generally, Core Fees only come into play for the more expensive, refurbish-able parts, ranging from batteries and tires to electronics modules, to entire transmissions. Smaller, lower-cost disposable parts rarely entail a core fee.
Nevertheless, Cores are the lifeblood of the remanufacturing industry that endeavors to provide you a lower-cost alternative to the high-priced dealer treadmill that so many wish to avoid. This is an important goal, but we differ with the method most suppliers use to obtain cores.
We learned a lesson early on in our history. Having talked with many consumers who came to us because they simply could not afford dealer prices to get their much-needed vehicle back on the road, the prospect of tacking an extra $200 or $300 dollars onto the front-end of a sale literally meant that a single mom would have been unable to make rent that month or put food on the table. We found her case and many like it unacceptable. We made a commitment right then to never charge an up-front core fee, and to instead reward her with extra income for later sending in her core so we could help the next person down the line.
There is another lesson we learned in our earliest days when we literally had to send some customers to the dealer because a prior customer never sent us their core. We realized how important it is for us to help people understand their role in the larger system, and we’ve held strong in our faith that given all the facts, people’s better nature will prevail in paying a good deal forward. Now, we were small and among the first in this space, so these examples stood out, but the principles still apply at any scale.
When you buy an auto part from MAKS, we treat the core submission process in a completely different way from the rest of the industry, paying you outright for your core afterwards, and only when you’re ready to sell. We never want to force you into an arrangement.
To appreciate just how MAKS is different, it helps to first understand the traditional “Upfront Core Fee” model.
When you turn in your core under a conventional upfront core fee program, you are merely getting your own money back. While core fees can range from tens to hundreds of dollars, in the grand scheme of things, it really doesn’t matter the amount of the core fee. Core fees are arbitrary. The same part could have a core fee of $100 or $1000. It is all “funny money” anyway — as the seller is just going to be giving back your own money. You are not actually selling your core or making any money in the process.
Core fees exist to incentivize buyers to submit their broken units so as to keep the entire re-manufacturing ecosystem functioning.
The Importance of the Remanufacturing Ecosystem
Remanufacturing as an industry provides a great many benefits to society at large.
First, it is very good for the environment because it recycles the major, most resilient components that went into the original product. This lowers the mining or sourcing of raw materials while substantially reducing the energy required, and consequently the “carbon footprint” of the part. It also keeps replaced units out of landfills.
Second, you as the consumer get a much lower price and often with warranties equal to or better than provided by the Original Equipment Manufacturer (OEM). Moreover, sometimes remanufactured is the only option when the original part has been discontinued, as is often the case when your vehicle is more than 10 years old.
Third, depending upon the quality of remanufacturing, you may actually get a part that is better than new, because a quality remanufacturer, having seen the full gamut of common failures, has learned the original part’s vulnerabilities often better than the OEM, and can introduce minor engineering improvements during remanufacturing to shore up those vulnerabilities.
The only “losers” in the remanufacturing ecosystem are OEMs when their business model is based solely selling only “New Condition” parts at the highest prices and margins. Fortunately, over the years OEMs are increasingly recognizing the merits of the remanufacturing business model.
The amount of the conventional Core Fee is usually set by the remanufacturer, who must strike a balance between making the core fee high enough to incent you to finally send it in (or bring it to the retailer where you made the purchase) vs making the core fee so high that consumers will look for a better deal that doesn’t tie up so much of their money up-front. Because core fees are so arbitrary, they rarely reflect the actual fair market value of the core itself.
When you take your vehicle to a mechanic or dealer, the very same mechanism is happening, albeit behind the scenes. When the mechanic orders a remanufactured or new unit, they are charged the core fee, which mechanics may pass on to you in the purchase price of the part. When the mechanic, shop, or dealer sends the core in, they get back the core fee in the form of additional profit.
Surprisingly, consumer cores alone are not in great enough supply to adequately feed the remanufacturing ecosystem. This is for a variety of reasons. Either a core is in such a poor state that it is beyond remanufacturing, or the consumer fails to ever send in the core, in which case the core fee becomes pure profit to the remanufacturer. Although the remanufacturer would prefer to get your core to feed their rebuild process, they’ll settle for this additional profit. So, instead of relying solely on consumer cores, remanufacturers also turn to salvage yards and brokers for what are called “Pulls”.
What is a “Pull”?
A “pull” is a part that has come out of, or has been “pulled”, from a salvage vehicle.
Salvage yards routinely buy whole or partial vehicles from consumers, auction houses, and insurance companies. These are vehicles that have been “totaled” or are otherwise simply beyond cost-effective repair. The salvage yard then disassembles the vehicle, offering its parts online direct to consumers on such marketplaces as eBay, or will sell groups of like parts in bulk to salvage brokers. Brokers, in turn, find remanufacturers looking for the class of part they specialize in.
To the remanufacturer, a “pull” is like a core, but with one key difference: Where a core has been replaced invariably because it has a known inherent failure, “pulls” have a higher likelihood of still being in perfect working order. Pulls can be ready for resale at a much lower average remanufacturing cost than cores. Pulls also differ from cores in that where the core fee is somewhat arbitrary, pulls are sold to the remanufacturer at fair market value and can be acquired in volume in a single transaction.
Moreover, while the remanufacturer may set a core fee of, say, $100, they may be able to buy that part from a broker for its true market value as low as, say, $25. The economics are simple: By charging an up-front core fee, you are incented to send in your core which costs the remanufacturer nothing as he is only going to give you your own money back. If you fail to send in the core, he keeps the core fee and just buys from a broker, along the way pocketing $75 profit in the above example.
But remanufacturers can’t rely on just cores or just pulls, as neither source alone can consistently provide a steady stream of rebuildable stock. Consequently, natural fluctuations will emerge in both core fees and fair market values tied to part number scarcity.
“No Core Fees” – The MAKS Difference
As mentioned earlier, since its inception MAKS broke ranks with the industry in that we don’t charge consumers an up-front core fee whatsoever. This is based upon MAKS founding principle that money should only change hands when and where true value is being willingly and directly exchanged.
Instead, we offer you cash at prevailing fair market value for your core, after your vehicle is back to 100%. So, instead of you tying up $100 or more and only getting back your own money (making yourself $0 on your core), with MAKS you tie up nothing and actually get paid cash for your core at fair market value. And, only when you are completely satisfied with your original purchase.
When it comes to the actual remanufacturing process, we don’t distinguish between cores and pulls. Every module we rebuild undergoes the exact same process from scratch. While pulls might generally have fewer issues in need of fix, we make no assumptions and therefor every unit undergoes a complete overhaul and testing regimen.
One of the challenges MAKS has faced with this industry-defying model, is that often our customers develop a false sense of the value of their core because of the arbitrary, inflated nature of our competitors’ up-front core fees. But once they understand the dynamics what is truly happening behind the scenes, they understand that we offer fair market value and real cash for their core.
More importantly, with no core fee we rely solely on your willingness to send in your core, even if the money means nothing to you. You may not ever know it directly, but you are truly providing that single Mom or someone just like her a far more affordable option.
Regardless of where you buy your replacement part, sending in your core is not only a smart way to keep your total repair cost down, it is vital to keeping the remanufacturing industry a viable source of lower cost alternatives, while being ultimately good for the environment.