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Flick the switch to on and o/d cuts in at about right revs, flick switch off and even when under rev cut in still stays on.
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Hmmm. Not sure what the "rights revs" are for overdrive engagement. It should operate at about any RPM, although often you have to ease off the throttle just slightly to get it to kick in.
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Have to change into second or stop at lights for it to disengage, any ideas where to start looking for prob?
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Normally you have to "blip" (technical term) the throttle to get overdrive to disengage; i.e., rev the engine slightly as you turn the overdrive switch off, to get it to disengage. It may seem a bit unnatural to rev the engine when you are decelerating, but think of it as a form of double-clutching (or as the Brits say, "double-declutching). Are you doing that?