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Why You Shouldn't Bite on the $50 Apple iPhone 4S Discount

NEW YORK (MainStreet) -- The Apple Store is reportedly price-matching cell phone carriers and retailers now offering a $50 discount on the iPhone 4S.

Don't be tempted.

The same thing happens every year: Just before a new iPhone or iPad is about to launch, a couple of retailers will start offering small discounts on the current generation of the gadget.

And why not? Most savvy shoppers know when the Apple (AAPL) next generation is right around the corner, so they're inclined to play the waiting game, and that means a sales slowdown. And when there is a sales slowdown, retailers are willing to slash prices to move product. Earlier this year, for instance, Meijer offered a $70 discount on the iPad 2 a month before the new iPad came out.

Now that the new iPhone is upon us, we're seeing the same thing. But this time around it seems to be happening a little earlier than usual, and even the Apple Store is getting into the game. As TheStreet reported late yesterday, Sprint (S) and Best Buy (BBY) have started offering the 16 GB version of the iPhone for $149.99, a $50 discount, and Apple Store locations have expressed a willingness to match that price. That means a 25% discount on the current iPhone before Apple has acknowledged that a new iPhone is even in the pipeline.

As tempting as it sounds, there are reasons to resist this deal with the new iPhone right around the corner.

We don't know for sure when the new model is coming out. We don't know for sure what it's going to look like. But the rumors are coalescing around a number of points. First, you're likely to see a full makeover -- unlike the iPhone 4S, which turned out to be the same body as the iPhone 4 but with souped-up guts. That makeover is likely to include a larger screen as Apple finally catches up to the larger screen size offered by the likes of Samsung and other Android phone manufacturers. It's also likely to have faster 4G LTE data speeds, and may also support mobile payments.

If past is pretense, some of the rumored features won't pan out. Still, if you're willing to wait six weeks or so -- most rumors seem to suggest a release date in mid-to-late-September -- you'll be able get a truly next-generation iPhone for $200, just $50 more than you'll pay now for the current generation.

Without knowing for sure what it will look like, we can't say for sure that it will be worth the wait, or the extra $50. But consider this: The difference between $150 and $200 isn't nearly as big as it seems when you consider that it's attached to a pricey two-year contract. And when the total cost of the phone and contract are considered together, $50 starts to look like a drop in the bucket. My own contract with Verizon, for instance, sets me back about $92 a month; when my two years is up, I'll have spent a total of over $2,400 for the phone and contract. If I'd instead purchased a previous-generation phone for $150 instead of $200, my total outlay would be $2,350 - a savings of just 2%. Suddenly the $50 discount doesn't sound like such a big deal.

And if your monthly budget is tight enough that the $50 savings is actually a big deal to you, consider this: In a little over a month, that discount on the 4S will be doubled. Whenever a new iPhone is released, the previous generation invariably comes down by $100, meaning that in mid-September the 4S will be starting at $100. Either way, it makes sense to wait a month.

So unless you just dropped your iPhone in the toilet and desperately need a new smartphone now, we suggest showing a bit of patience.

--By Matt Brownell

More on Apple:

Why Apple is poised to make history.

Google's recent quarter should scare rivals.

Apple iPhone 5: reading the tea leaves.

By Matt Brownell

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