A car dealership is within its rights to refuse to take cash for a vehicle purchase. Under federal law, businesses that price their merchandise or services in dollars have to accept dollars as payment. But accepting "dollars" doesn't necessarily mean accepting cash. Private entities are generally allowed to set their own rules on how they accept payment.
Look on the face of any piece of U.S. paper money and you'll see the inscription, "This note is legal tender for all debts, public and private." The key is that it says "debts," not "purchases." Creditors are legally required to accept cash as payment for any debt denominated in dollars -- meaning that the debt is for a stated dollar amount, rather than, say, British pounds or shares of stock. This requirement protects debtors, as it guarantees that if they have the money to repay their debts, they could convert it to cash, and a creditor couldn't refuse it.
The requirement to accept cash applies only to debts, however. According to the Treasury Department, there is no federal law requiring any private business or individual to accept cash as payment for goods or services. Businesses can set whatever policy works for them. That may mean accepting cash; it may mean accepting only certain denominations of cash; it may mean refusing cash or checks and accepting only credit cards. That's why a car dealership is free to refuse to take cash for a vehicle purchase.
If there's no legal obligation for a car dealership to take cash, then there's no legal obligation for it to tell you why, so you might not get an explanation. Common reasons for declining cash include security concerns, the hassle factor and federal paperwork requirements. Accepting cash for car purchases would result in the dealership having tens of thousands of dollars in cash on hand, an inviting target for criminals. It could mean special trips to the bank for deposits. And under federal money-laundering laws, any business that accepts more than $10,000 in cash has to report the transaction to the Internal Revenue Service.
If a car dealership won't take your cash, you can try to find one that will. Or you can turn your cash into something the dealership might be more prone to accept, such as a cashier's check, a money order or traveler's checks. Purchasing such "monetary instruments" might also trigger an IRS report from the financial institution where you obtain it, but as long as the money comes from legitimate sources, there's no need to worry.