A man tried to extort money from a Sydney mechanic he blamed for losing his Mercedes-Benz by threatening him with a large black sex toy, a court has been told.

Aaron Sabbah was armed during an attempt to demand money from Michael Monajed, Sydney's Central Local Court was told during a bail application on Friday.

"What is the alleged arm?" Magistrate Eve Wynhausen asked.

"It's a black dildo, your honour," prosecutor Christian Hearn said.

According to court documents, Mr Sabbah arrived at Mr Monajed's workshop on April 22.