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In this video tutorial, Alejandra on Twitter explains the breakdown of extended warranties. She mentions that 12% of the typical extended warranty covers the statistical probability of the item breaking. The rest of the money goes towards salaries, overhead, profit, and a marketing fee for the organization selling the warranty. She gives an example of how buying a $1500 extended warranty for a car can result in the dealership making a significant profit, while the average repair cost is only $180.