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Alejandra explains that 12% of the cost of an extended warranty covers the statistical probability of the item breaking, with the rest going to salaries, overhead, profit, and marketing fees for the selling organization. This means that the dealership can make a significant profit from selling extended warranties, sometimes more than half of the cost. For example, adding a $1500 extended warranty to a car finance plan could result in the dealership making $700. Alejandra emphasizes that the average repair cost covered by the warranty is only $180.