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Alejandra on Twitter discusses the financial aspects of extended warranties, stating that 12% of the cost covers the statistical probability of the item breaking. The rest of the money goes towards salaries, overhead, profit, and marketing fees. In most cases, over half of the cost goes to the organization selling the warranty. For example, a $1500 extended warranty added to a car finance plan could result in the dealership making $700 profit, compared to the average repair cost of $180.
