Take the money they want for the extended warranty (lump sum or monthly payment) and put it in a special savings account as a self-insured extended warranty. I would also add a little to it monthly. When the time comes for a repair, ask yourself, "Should I pay this claim or deny this guy his just due?" Just a thought...
Dealers make a ton of extra money on these "extended warranties." That's why they push them so hard. They really don't care whether you are covered or not. They have plenty of repair business to keep them busy.