I don't think you understand what extortion is. Consequences of honest mistakes are reimbursed by cash all the time. That's what car insurance is, for example.
If someone accidentally dings my car, the insurer can pay to repair the damage, or I can choose to not repair it and settle for a cash sum. This is no different.
The dealer already agreed to bear a cost, this would be an alternative settlement that costs the dealer less than what it already agreed to absorb.
This transaction actually maximizes the mutual benefit to the customer and the dealer, since no additional tax and title costs to the pair would be incurred.