There are two types of extended warranties. There are agreements issued by the original manufacturer, which are actually pretty rare in the consumer electronics industry. There are agreements that are issued by third parties. Generally speaking, extemded warranties are a cash cow for those who sell them. There is zero manufacturing and labor costs. The service agreements are often referred to as "recurring revenue."
Original Equipment Manufacturers that offer extended warranties are pretty rare, but not unusual. It is far more profitable for them to simply offer "factory authorized" repair services than it is to enter into contracts that generate recurring revenue. As Bob pointed out earlier, there is a risk/reward gamble involved in offering extended warranties. Simply offering repair services involves little to no risk.
Most of the third party vendors that offer "extended warranties" will surprise you if you take the time to read the fine print. During the first year of ownership, they will offer an "extended warranty" that tells you to mail your defective piece back to the manufacurer, and have a nice day. What they are saying is that since you're still covered by the original manufacturer's warranty, your equipment failure is not their responsibility, but the manufacturer's. Don't call us until the original warranty has expired.
Once the original manufacturer's warranty has expired, most contracts will contain language that is similar to most original warranties. Most original warranties tell you to mail the piece back in the original packing material, supposedly in order to guarantee that no additional damage occurs during shipping. I ask, how many people keep all of the original packing materials more than a year after the original purchase? Yes, you can mail the piece back in substitute packing materials, but don't be too surprised if your gear arrives with supposed shipping damage. Didn't you spend the extra money to insure the shipping when you sent it off?
Assuming that you do have the original packing material, you will often discover that you must pay for shipping and that there is a signficant DEDUCTIBLE that you must pay in order to get your gear repaired. Unless you are taking out a warranty on gear that is very costly, an extended warranty is more of a gamble on your part than it is on the part of the third party offering the extended warranty.
DON'T GET ME WRONG. There are some highly reputable extended warranty agreements out there, but most of those are almost excluseively provided by the manufacturer.. However, more times than not, extneded warranties are not worth the investment because most consumer electronics are designed to be disposable,anyway. The cost to repair will meet, or exceed, the cost of a new replacement.
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