As with many other products, extended warranties on cars may be a better deal for the dealer than for the consumer. "They cost a lot of money up front and in many cases never pay for themselves," says Phil Reed, author of Strategies for Smart Car Buyers (Edmunds, $15, www.amazon.com).
Still, you might consider buying an extended warranty if you expect to keep the car for more than five years (when major problems become more likely), if the car model doesn't have an impressive reliability record, or if your monthly household budget can't withstand unexpected expenses.
If you do opt for an extended warranty, you have two kinds from which to choose:

Third-party warranties are cheaper to purchase but often require the owner to lay out cash for repairs, then submit a claim for reimbursement.

Manufacturer warranties are typically easier to use but more expensive. Don't be afraid to negotiate: Dealers may be marking up manufacturers' warranty prices 100 percent or more above cost.

Also note that you can purchase an extended warranty at any time — you don't have to get it the day you buy your new car. You may want to see how the car holds up first.