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In this video tutorial, Alejandra explains the financial aspect of extended warranties. She reveals that twelve percent of the money paid for extended warranties covers the statistical probability of the item breaking. The remainder of the payment goes towards salaries, overhead, profit, and marketing fees. She emphasizes that the majority of the money goes to the organization selling the warranty. For example, if you purchase a $1500 extended warranty for your car, the dealership likely makes $700 in profit, while the average repair cost is $180.
