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The Mechanic stated it would cost $200 for parts and repair for what they thought the issue was however, after doing the work and putting the part in, they found they were wrong and decided they couldn't fix it. They reversed their work and still charged me an hours labour and wouldn't give me my car unless I paid this.

Is this fair and correct that they have done no repairs yet charged me?

Hi there,
The only fee that could be justified in this case would be a diagnostic fee as they had to check the car out for the problem. It is good that they reversed the incorrect labour and parts, but it is justified that they would charge a diagnosis fee to get to the now correct fault (which they can't fix).