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I would have called the police. People shopping for new cars always get in a buying mood with police cars in the lot and the service manager being taken away in handcuffs for assault. I would agree to drop the assault charges if he agreed to drop the "service" charges. After we got the car back I would follow up with a complaint report to Consumer Affairs and hate mail to the regional manager cc the owner of the dealership. They just love getting those "unsatisfied customer physically threatened by service manager" letters.

Always always get an estimate in writing from EVERY service provider. No surprises.