Because the main purpose of cash payments in small businesses is tax evasion - not just VAT but also paying family members in cash and thus dodging even more.

Fun fact, credit card merchants successfully made it illegal in the USA too, but that legislation expired and now it is legal to charge more for credit card usage (though credit card companies prefer that you offer a "cash discount" than an equivalent "credit card fee").

In Costa Rica this is illegal too but going through the hassle of reporting it to the local authorities is a pain and you won't gain much, just annoy the dealership.

Usually the POS rate is around 2% so at the end of the day you'll split it evenly and get a 3% discount. A few years back it was even highter and I bought several home appliances and saved around $100 so it's worth for both parties.

Now imagine people that deal with ranges from 10K to 100K - It's definitely worth it shaving a few bucks here and there