I came across this interesting article on CNET.com about whether or not to buy an extended warranty or service contract when you purchase an electronic item. The article has some good considerations, but ultimately, the answer is "no."
The main reason is because the warranty is seen by the retailer as pure profit. Often times the warranty only covers a period where the good in question has a low probability of breaking down. Even if you extend the warranty on your car, the amount of money you pay could be placed in a savings account or investment and when the machine or electronic good does break, you could withdraw it to pay for the repairs or buy a new one.
The article does mention that you should take into considerationt the price of the thing you are buying. A plasma screen TV costs a couple thousand dollars and a fraction of that for peace of mind is worth it, according to the article. The problem I see, is that often times the warranty on something like that isn't "$10 or $20 more." It could be $500 dollars for a 2 year extdended warranty. Placed in a good interest producing account, and you would probably have enough money to cover any repairs, if they in fact need to occur. The odds are against there even being a need, in which case, you keep the money.
The article also points out that manufacturers often times offer a warranty that is sufficient to find out if there are no inherent flaws or errors in the purchase. If I buy a TV and get it home and it doesn't work, then I can usually (almost always) take it right back for a replacement or a refund. Most problems occur well within this short time, normally a month.
So when you are out shopping this "holiday" season, think twice about accepting the warranty push from that sales clerk. It may just be wasted money.
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