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Alejandra explains that twelve percent of the cost of an extended warranty covers the statistical probability of the item breaking. The majority of the money goes towards salaries, overhead, profit, and marketing fees. In most cases, over half of the cost goes towards the organization selling the warranty. For example, if you buy a $1500 extended warranty added to your car finance plan, the dealership likely makes $700 profit, while the average repair cost is $180.
