All cars start off with a new car factory warranty and, since many old car owners (especially in northern countries) have a second car that is fairly new, this article is written for vehicles still covered by the factory warranty.
While a good warranty is an attractive feature in a new car, the factory warranty is basically there to protect the factory. While it makes sense that the dealership should make money in their service department no matter who pays for the repair, it almost seems as though they have some sort of incentive from the factory to avoid making those repairs.
Let me give you an example. I ordered a new 2002 Chevrolet Camaro and noticed a rear-end noise shortly after delivery. I complained to the service adviser (at Dave Lyons Chevrolet in Fort Erie) and he tried to convince me that it was my driving or that it was a normal sound. I had a mechanic friend in a transmission shop (Astro Transmission in Niagara Falls) who put the car up on his hoist and confirmed that I had a gear noise from my axle. After some persistence, I was able to convince the Dave Lyons service manager to have one of their mechanics drive around with me. He too confirmed that I had a rear-end noise.
The mechanic ordered a new ring (crown) and pinion set and the service department at Dave Lyons installed it for me shortly after. It is crucial that the mechanic correctly set the gear contact so that the ring gear and pinion gear mesh properly. Since I didn't get the impression that Dave Lyons Chevrolet did very many axle repairs, I had my doubts that the gears would be properly adjusted. When I got the car back, it still had the same noise, probably worse. Since I bought an extended warranty plan for this car, I figured I would just have them repair the axle again at the next scheduled service.
By the time the next service came around, Dave Lyons had gone out of business and Falls Chevrolet in Niagara Falls had stepped forward to take care of the Fort Erie GM customers. So for the next scheduled service of this car (37,500 km in November of 2008), I brought the car in to Falls Chevrolet. Much to my dismay, I discovered that my extended warranty had expired a few months previously but a GM Protection Plan was still available for it. I still wanted the noise checked out and Falls Chevrolet had one of their mechanics test drive my car to diagnose the problem. They reported that the noise is normal. I complained to the Falls Chevrolet service manager about this misdiagnosis and he emphatically tried to convince me that I had a tire noise and not a gear noise. A gear noise changes in pitch at a constant speed with slight changes in load. A tire noise changes pitch in proportion to vehicle speed. I have no idea why the Falls Chevrolet service manager would so vigorously defend such an obvious misdiagnosis. This isn't a serious problem but the whine can be a bit annoying.
Being out of warranty now, I had no intention of pursuing this further with Falls Chevrolet as I knew this repair would be very expensive. The point I am trying to make is that dealership service departments do not know best. Even though they try to convince you that their service is the best because no-one knows your vehicle better than a factory-trained technician, they can still be either incompetent or not looking out for your best interests. Dealership shop rates are usually the most expensive around so you can potentially pay top dollar for mediocre service. Then again, sometimes only a factory-trained mechanic can correctly diagnose and repair an unusual problem.
If you have a problem with your new car and you are not getting the satisfaction you require, ask knowledgeable friends for advice, research consumer magazines, search Internet forums for others in a similar situation (most cars have their own forums), get a second opinion from a reputable specialty shop, etc. Do not accept the answer given by your dealership's service adviser if you disagree with it. Be persistent but make sure you are well armed with information to prove your point. If your car is out of warranty, do not hesitate to take your vehicle to a reputable specialty shop. Chances are that the specialty shop will have the training to correctly diagnose your problem and the experience to do it right the first time. Be sure to first check the specialty shop's reputation before committing your car to them for expensive repairs.
As for extended warranty plans (actually service contracts), it is debatable whether they are a worthwhile investment. Before buying one, research your car's mechanical weaknesses with a book like Phil Edmonston's Lemon-Aid. Having read the repair reports for several cars I've owned previously, I find that the books are very accurate. The extended warranty is a bit of a gamble because you're hoping that you will need the repair while the extended warranty is in effect. For extended warranties that extend an already extended warranty (like the GM Protection Plan), the warranty is priced to ensure that the warranty provider does not lose money (more likely makes a profit) so you won't necessarily save any money. You're better off anticipating that certain repairs are likely with your vehicle and have a plan in place when the time comes.
A new "feature" of some extended warranty plans is a rebate for not making any claims. While this sounds like a great way to save money because there is a chance that you can get some of your money back for the extended warranty plan, thereby being almost "free", this is also a way to discourage you from making a warranty claim.
If you're car is so failure-prone that you will likely come out farther ahead by investing in an extended warranty plan, you may be be better off cutting your losses and replacing your car while it still has value. Once you're faced with an expensive repair, you can't get top dollar for your car if you want to sell it and you'll be stuck driving your lemon after paying for the repair to at least get some value out of your repair "investment". It really does pay to be as knowledgeable as possible about your car.