How much do they make? The dealership makes quite a bit! My dad used to sell cars. Now do the math on inflation because this was 20+ years ago, but the dealership he worked for paid $90-$100 for an extended warrenty policy. Whatever the sales guys got for the policies was up to their negotiating skills...$200, $350, $500. Anything went. How much of that the sales person he/she themselves got, I didn't ask.
He's always told me that an extended warrenty on a new vehicle was a waste of money. He did say that getting one on a used vehicle depended on the age/shape of the vehicle (common sense). His point, though, was that the cost should definately be negotiated.