Buying a Tesla with bitcoin? Not so fast

Virtual currencies seemed a bit more real following reports last week that someone bought a Tesla Model S using bitcoins in California.

The actual story, however, appears a little less exciting, according to the dealership's general manager.

Pietro Frigerio, the general manager of Lamborghini Newport Beach in Costa Mesa, Calif., told CNBC on Monday that he never actually accepted bitcoin during the transaction. Instead he treated the purchase like he would with a buyer asking to pay in foreign currency or gold bars: he told them to convert the bitcoins to U.S. dollars first.

(Read more: Is bitcoin the fad of all fads?)

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A Tesla Model S car is displayed at a Tesla showroom in Palo Alto, California.

"The transaction in our bank account, we received a wire in U.S. dollars," Frigerio said on "Squawk on the Street." "So you could say that I didn't want bitcoins. And I never touched bitcoins."

The dealership used an app called BitPay to transfer the buyer's bitcoins into dollars during the transaction. According to its website, the dealership sells a certified preowned Model S—Tesla's flagship electric car—for about $119,000. The dealership's marketing director told media outlets last week that the car cost about 91.4 bitcoins.

The volatile currency was trading Monday at $915 per bitcoin after reaching a high of more than $1,200 last week, according to exchange Mt.Gox.

(Read more: $100 million bitcoin heist? Who ya gonna call?)

Frigerio said the entire transaction occurred over the phone with a customer based in Florida who bought the car sight unseen.

"It's like if you come into the dealership and you want to buy a Lamborghini using gold bars," Frigerio said. "We will not accept that. We will accept U.S. dollars. You go out. You exchange it. You come back to us. That's how it worked."

—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street."

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