[ezmaass]

Choosing to buy a warranty or not is all about risk. You need to factor in your potential risk, which must include things like how long you plan to keep it, if you abuse the car (drive it hard), any past issues or concerns, your ability to pay for a large repair, etc.

In most cases, insurance companies make BIG money, and if you can "self insure," that's sometimes your best bet. Consider this: most insurance companies are really investment banks in disguise. Selling insurance is really only a means of raising capital for running and investment firm. Take a look at companies like Markel (great stock to own by the way - like a mini Berkshire Hathaway) - an insurance company but really makes most of its money from investing premiums.

So what does that mean? Lots of liquidity - much less in payouts than what's collected in premiums. Hell, there are even laws governing this - BASEL II and BASEL III, for instance - due to the high popularity of insurance companies really operating as investment banks.

Now, keep in mind that I think a 2011 550xi is probably going to be an expensive car to maintain as it continues to age - it's only 4 years old at the moment, but give it a year or two more, and that's when the bigger problems (in my experience) tend to start really kicking in... which is also why I've sold my cars at about 6 years, which is what I think is the sweet spot between getting value and before most major repairs starting coming into play (the "knee" in the curve if you will). But anything can happen, and there's no magic formula for all cars obviously.

Not to oversimplify it, but here's my logic... if the following are true, I'd pocket the $5,600 and take my chances:

1. You're the first owner of the car and/or have it's entire maintenance history, and you feel comfortable that it's been well maintained.

2. You drive it moderately and don't beat it up.

3. You plan to keep it for no more than 1 or 2 more years.

4. You'd be able to pay for a major repair if it hit you.

If you answer "no" to 1 or more of the above statements, I'd consider getting the warranty.

For future reference, I'd encourage people to also look at GEICO's Mechanical Breakdown Insurance (MBI). You need to be the first owner of the car, and you need to add it to your policy before the car is 1 year old and 15k miles, I think. However, it's very, very cheap - you'll likely pay less than $1k into it before the car is out of warranty. And then it covers you up to 7 years or 100k miles, whichever comes first. So, you somewhat need to know that you plan to keep the car, and you need to be the original owner. But it's really nice peace of mind. All GEICO policy holders I've known who have used it love it. There are no exclusions and a $200 deductible, which makes it quite simple.