[FRiSson]

It operates the way that insurance operates. Essentially they make a statistical and probability analysis. If it shows that the initial price for the warranty is very likely to be far more than the total payout than they offer to insure you. Now, if you are the 1 in 4 or 1 in 10 people that actually needs more warranty work than the policy costs then you are lucky. However, statistically, you are much more likely to be a loser on the deal - just like at the slot machines. However, and here is the caveat, since it is a new vehicle, the reliability of the car is less predictable. It could be that the FR-Z is quite problematic later in its life. In that case, everyone who bought the warranty will be winners. But that is pretty unlikely. Both Toyota and Subaru have a better-than-average track record with new cars.

Another thing to think about is that they will pay out money for repairs over the life of the warranty - while you have to put up the money up front. Therefore you have to calculate the lost value of that money over the x years of the warranty. While they may only have to pay out on the last few years. In that way, they make money (by investing it) and you lose money (lost interest and opportunity for the use of that money) during the period of the warranty. So your real cost is higher than a dollars-to-dollars comparison.