Mr Musk, a well known Bitcoin enthusiast, made the unexpected announcement in a tweet.
But Bitcoin’s value rapidly moves up and down – meaning the cryptocurrency price of the car could change day to day.
Tesla has invested heavily in the digital currency, buying $1.5bn (£1.1bn) worth of Bitcoin.
And that apparent vote in confidence saw Bitcoin’s value shoot to a record high.Wednesday’s announcement also led to a modest bump to the price of Bitcoin.
Mr Musk tweeted Tesla would be running its own internal software to handle Bitcoin payments, which “operates Bitcoin nodes directly”.
Nodes, in this sense, are the computers that process Bitcoin transactions.
And in an apparent bid to assuage fears of Bitcoin enthusiasts who want to see the ecosystem thrive, Mr Musk said: “Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat [government-controlled] currency”
In the US, orders for new Tesla cars can now be secured with the equivalent of a $100 deposit in Bitcoin.The facility would be rolled out to other countries in the coming months, Mr Musk said.
Bitcoin’s volatile price makes its use to buy real-world goods somewhat complicated. For example, Tesla’s terms and conditions say if a refund is needed, it can pay in either the exact amount of Bitcoin paid or in US dollars based on the dollar price of the car – whichever it wants.
So if the price of Bitcoin shoots up before a refund is issued, the customer could lose out.
The announcement comes the same day US magazine Consumer Reports warned Tesla cars were recording and transmitting video footage, to help develop its self-driving technology, in a way that raised privacy concerns.
Other carmakers did not record or send the video they captured, it said – instead using the technology to warn a driver if they were not paying enough attention.
“If Tesla has the ability to determine if the driver isn’t paying attention, it needs to warn the driver in the moment, like other automakers already do,” it said.
John Davisson, from the Electronic Privacy Information Center, told Consumer Reports: “In Tesla’s approach, there’s always the possibility that insurance companies, police, regulators, and other parties in accidents will be able to obtain that data.”
Last week, Mr Musk denied reports his cars’ sensors and cameras could be used for spying on the Chinese saying Tesla would be “shut down” if that were the case.
And on Tuesday, CNBC reported a US federal agency was investigating complaints over Tesla solar panels catching fire.
A whistleblower who worked for Tesla had filed formal complaints with government officials over “unacceptable risks” in the installation of the solar panels, the report said.
Among the known fires are seven on the roofs of Walmart shops in the US, with the supermarket giant alleging negligence in the installation.
The two companies reached a settlement over the issue in late 2019.