Have no doubt, once your basic warranty expires, if extended warranties were not a profit machine, no one would be selling them. That is not to say that warranties cannot come in handy. Instead of buying a car that will cost you thousands to repair in the event it breaks down, you leave the dealer knowing you have a new car and if it does break down, through no fault of your own, someone else will foot the bill.
The fine print of the warranty is where the crucial information lies. Every manufacturer and dealer may or may not cover slightly different details under the same types of warranty. The only way to be certain about what your warranty covers is to do a thorough reading before signing anything.
For example, generally basic warranties cover everything mechanical, whether it is a break down or simply an annoying squeak. Common exclusions are tires, emissions or rust/corrosion coverage. These are frequently covered by separate warranties. The exclusion list may extend to wind shield wipers, brake pads, drums and rotors, light bulbs, aftermarket accessories, exhaust system, hoses and belts; it depends entirely on the warranty company.
Some warranties will also come with additional perks, such as: free gasoline, roadside assistance, periodic maintenance, towing service, car rental reimbursement, some wear and tear, and electronic equipment coverage. It will probably have to be a higher end automobile before a manufacturer will throw in this sort of royal treatment though.
While warranties are always understood to cover breakdowns that result from normal wear and tear (warranties do not cover accidents, misuse or maintenance neglect), what each company defines as normal wear and tear can only be found in the fine print. You should pay close attention to this when purchasing an extended warranty.
Warranty companies that screw over the consumer are unfortunately quite common, and tend to do the most marketing and advertising, so you need to exercise caution. Knowledge is invaluable when the time comes to select which company you will be purchasing your warranty from. Do your research online before making any decision and never shy away from asking friends or family for advice.