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Alejandra on Twitter discusses the rationale behind purchasing extended warranties. She explains that twelve percent of the cost of an extended warranty typically covers the statistical probability of the item breaking. The remaining amount goes towards salaries, overhead, profit, and marketing fees. In most cases, the organization selling the extended warranty receives well over half of the payment. For example, if you buy a $1500 extended warranty with your car finance plan, the dealership likely makes $700 from it. The average repair cost covered by the warranty is $180.
