It sounds like the collet itself isn't any good. The published runout for a good collet and collet holder is well under .001 and the precision ones are 2 tenths.
Check this out
ER-16 Collet quality.
The real test is to put an 1/8 pin in the collet and use an indicator to see how bad it really is.
Cheap collets are a case of you get what you pay for.
By the way, what is considerable runout?


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