Extended warranties are almost certainly more profitable for the dealer than selling the car itself. True, someone is bound to have an expensive problem that makes them thank their decision to pony up the extra money. They are the exception, however.

I've owned 5 Toyotas; I'd have lost money on every extended warranty had I bought one. At this point, it would be almost impossible for me to experience a repair that equaled the money saved. Dealers sell warranties because they make money on them, i.e., the premiums exceed the claims . . . . by a wide margin.

 

Like life insurance, the best possible outcome of owning an extended service contract is not having to ever use it.

Toyota's extended warranty (and some third party warranties) basically extend the new car warranty if purchased while the vehicle is still within the original factory warranty period. I find Toyota's original warranty and extended warranty to be quite comprehensive. At a cost of about $220 per year for 5 extra years and 64,000 extra miles of coverage, I think it is quite affordable and reasonable for vehicle that costs as much as it does. I hope that my vehicle will not have a failure, but I know it is possible and one major breakdown will easily exceed the original cost of the extended warranty.