Warranty Profit: Last year, profits from warranties accounted for all of Circuit City’s operating income and almost half of Best Buy’s. Profit margins on contracts are between 50% and 60%. That’s nearly 18 times the margin on the goods themselves. For example, a 4-year contract on a $3,000 flat-panel TV costs about $400. Best Buy gives its insurers $160 and keeps $240 for itself. (Business Week 12/20/04)
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