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The thermostat regulates the temperature of your coolant. At a predetermined temperature the thermostat will open to let coolant flow to the radiator and be cooled by airflow or the fan. Over time the thermostat will become stuck open or closed, leading to a variety of issues. A closed thermostat will never allow the coolant to reach the radiator and be cooled. Hot coolant will continue to circulate through the engine and absorb even more heat until boiling and the system overheats. An open thermostat is not as bad but is still not ideal - the coolant is always cool, with the temp needle always reading in the cool range. This tells the ECU to richen the fuel mixture to bring the car up to normal operating temp. So your fuel mileage decreases and the car runs rich.
Replacing the thermostat is an easy but messy job. This thermostat includes the main o-ring (but a housing gasket may be required). Consider replacing the housing and any associated temp sensors while you're in there. The cooling system will need to be bled after.
For vehicles with plastic thermostat housing