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When I turn the key in to start all the lights on the dashboard go out completely and when I turn it back to the off position the dash lights back up. What could the problem be if the battery is okay?

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See my answer here to make sure the battery is good. –  Larry Nov 13 '12 at 15:13
    
The lights (and all kinds of other accessories) should go off when you turn the key to "start." This is "load shedding" to make sure that all the battery's capacity is available for the starter and engine electronics. –  mac Nov 16 '12 at 18:29
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3 Answers

Some things to check in order of likelihood-

  • The battery may not be fine. Lights are not high load,so having the lights work is not an indicator of how healthy your battery is.
  • Starter motor. Some starter motors stick as the fail, so occasionally a good whack with a piece of wood is required (don't try this if you aren't sure which bit of metal is your starter motor, you might break something)
  • Fuses. Easy to check all your fuses in the fuse box with a multimeter.
  • Wiring. If all else checks out, you may need to carry out a full check on your wiring to see where the failure is.
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Based on the description, I'd agree with your first bullet. –  JoeFish Nov 13 '12 at 18:52
    
I'd bet money that it's the battery. I've seen a lot of them go out the same way. –  StyxRiver Nov 13 '12 at 22:47
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Have the battery load tested. I've had several batteries go dead in the same manner: dash lights working just find until you turn the key and it all dies.

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Make sure all the connections are clean. Test the battery to ensure it really has 12volts. Use a voltmeter.

I've had a battery that worked fine, but couldn't start the car because the connections needed cleaning. Even if there isn't corrosion it could be an issue. Once I had those add-on connectors that go on the end of the battery cable get so rusted it stopped the connection from working.

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