First of all, what are you purchasing? Most often, extended warranties are priced at just under what you would normally pay in repair costs. And most likely you will not need a repair at all during the life of the offered warranty. If you are purchasing something that has been on the market for a year or two, and you have done your research and chosen a solid product, there is a good chance you will never have to have it repaired. If there is a product defect, most likely it will show up within the life of the manufacturer's warranty, not three or four years later. Pass up the extended warranties on things like the standard tube TVs and digital cameras. Years of experience show the reliability of these TVs and cameras obviate an extended warranty plan.
And what about obsolescence? Figure you purchased a 4 mega pixel digital camera from a reputable company four years ago and the cost was $300 with a six month warranty. After two years the camera is having a problem and will not turn on. The manufacturer's warranty has expired. If you had purchased an extended warranty for $50 you may be able to get your camera repaired but the shipping is going to cost you $20. However, the camera is worth less then $100 now. Most people are ready to upgrade to a 7 megapixel with a more sophisticated battery anyway. With electronics, the market is so quickly changing that after two years the item is more or less outdated. Know yourself and your habits and needs before purchasing an extended warranty on something that if it actually does need repair will actually be outdated when it does.
Your credit card may offer the best extended warranty
Before signing on the dotted line for an extended warranty, look at your credit card. Many credit cards offer similar coverage, particularly on their higher end cards like the gold or platinum will tack on an extra year to the manufacturer's warranty, allowing you to replace the item if it breaks down within that time frame. With a Master Card if you can find "extended warranty" somewhere on your contract, you are in luck. With Visa it is called Warranty Manager Service. This may make the necessity of purchasing an extended warranty even less attractive.