Five Reasons to Wait Before Buying an iPhone

Sure, it's sexy and the hottest gadget around, but if you don't have an iPhone, pat yourself on the back.

Avoiding first-generation, "must-have" gadgets, such as Apple's(AAPL Quote) much-hyped cell phone, when they first hit the market is a financially wise step. While your friends are flashing their new iPhone around trying to make you jealous, be satisfied with the knowledge that by waiting to purchase yours, you will get a higher-quality product for a lot less money. And your finances will be a lot healthier than those who went out and purchased one right away.

Here are five reasons that you are better off waiting before purchasing a first-generation gadget:

1. Cost: First-generation gadgets are expensive. They often include new technology and components that initially come at a steep price. Over time, manufacturers will learn to produce these same components for less money, as well as make them more reliable. As the scale of units being produced increases, the overall costs of producing the gadget will fall. If you have the patience to wait about a year, you will likely see the price of the actual iPhone fall by as much as half.

2. Lack of competition: New, must-have gadgets initially lack competition. As soon as they are a hit, however, other manufacturers look to build their own gadgets to compete in the market. That means that the new gadget will initially come with a premium price that's rarely discounted -- and why the iPhone can currently charge $499 to $599 and lock you into a two-year service contract, when other phones sell for a fraction of that price. Once the competition begins to offer alternatives, Apple will need to lower its prices and innovate to stay ahead of the competitive curve.