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Alejandra explains the breakdown of extended warranties, stating that 12% typically covers the statistical probability of an item breaking. This means that if 1,000 air conditioners are covered, 12% of the money paid in for warranties is used for repairs. The majority of the remaining money goes towards salaries, overhead, profit, and marketing fees for the organization selling the warranty. In most cases, over half of the money goes to marketing. For example, purchasing a $1,500 extended warranty could result in the dealership making $700, with the average repair costing $180.
