Before you rush out and buy that brand new iPhone 3G S, consider the suggestions here. For some iPhone 3G owners, the 3G S may be unnecessary. For those who simply cannot wait read on, because there are ways to minimize the overall cost of the upgrade. In fact, you may even turn a profit.

The iPhone 3G S will be subsidized by AT&T for qualified customers ($199 for the 16 GB model and $299 for the 32 GB model). Unfortunately, if you currently own an iPhone 3G you are not a qualified customer because you entered into a two-year contract with AT&T last year. Unsubsidized, the iPhone 3G S is priced at an exorbitant $599 and $699 (plus the $18 setup fee).

AT&T is probably not going to alter its stance on the matter because, like it or not, offering subsidized phones only to new customers is standard industry practice. If you are an existing iPhone 3G owner, and do not have money to burn, consider all your options after the jump.

Early Termination

You can cancel your AT&T account and immediately open a new one, qualifying for the subsidized iPhone 3G S prices.

AT&T permits its customers to terminate their contracts early for a fee of $175. This fee is pro-rated: Under your AT&T contract the termination fee is reduced by $5 per month of the contract completed. For example, for those of you who bought your iPhone and renewed your plan in July 2008 your termination is approximately $120 ($175-$55 = $120) since you probably have completed approximately eleven months of your contract.

Aside from the pro-rated fee, AT&T imposes no other penalties for cancellation. Current iPhone 3G owners may cancel their contract and immediately re-enter into a new two-year contract with AT&T. According to a June 10, 2009 phone conversation with an AT&T representative, rumors that AT&T requires a sixty day period to reopen an account after early termination are not true. Moreover, the AT&T representative further explained that you can even keep your old phone number so long as you create your new account within sixty days of canceling your original account. Note — when asked for a source to reference the AT&T representative admitted that this information is not available online.

After a direct inquiry, an official AT&T spokesman stated that early cancellation is inconvenient and may be subject to extra fees and a new number — but confirmed that accounts are not frozen for sixty days. The only other caveat is that AT&T store representatives are not always up to speed with their own policies and procedures and are notoriously incompetent. As of the date of this article, AT&T representatives have confirmed that this is their policy regarding early contractual termination, therefore, be prepared to confirm with your AT&T representative that he/she knows how to ensure that you will keep your old number upon entering into a new contract. If they do not — find a representative who does.

If you choose this option you are looking at adding approximately $120 to AT&T’s subsidized prices as well as the $18 account setup fee that AT&T charges. Your overall cost for the 16GB iPhone 3G S should be approximately $337 and the 32 GB $437 — a saving of $262 in both cases.

Once you get your new account and iPhone 3G S you should consider further subsidizing your purchase by selling your old iPhone 3G.

Subsidize Your 3G S with Your 3G

You can further subsidize your iPhone 3G S by selling your old iPhone 3G on the open market. If you’re lucky, you’ll get up to $400 — making a $60 PROFIT on upgrading to the iPhone 3G S. Even if you do not go through the hassle of termination, you should probably still sell your old iPhone. Each strategy has its benefits. Terminating your contract and subsidizing your iPhone 3G S saves you the most money, but you will be stuck in another two-year contract. Paying full price and subsidizing your iPhone 3G S does not require that you incur any new contractual obligations, but it is more expensive.

At the moment, there are hundreds of people looking to buy and sell iPhones on Craigslist. Even after Apple’s most recent price cut, the unsubsidized iPhone 3G is priced at $499. Depending on size, condition, and location, you can expect to get anywhere between $200 and $400 for your iPhone 3G.

If you plan on subsidizing your iPhone 3G S, consider the following:

Use Your Warranty. First, read this article about getting the most out of your one-year warranty. Although you may not know it, your iPhone 3G may be defective. If you are able to identify a defect, you should take your iPhone 3G into the Apple Store to get it replaced. If you get it replaced, you are going to be selling a shiny new iPhone 3G, not one that has a year’s worth of wear and tear. You will undoubtedly have an easier time finding a buyer and that buyer will probably pay a higher price.

Add AppleCare. Second, if you have AppleCare, great. Be sure to mention it in your advertisement. If you do not have AppleCare, you should consider asking your buyer if they are interested in AppleCare. Remember, you can add AppleCare onto any Apple product at any point during the first year of its life. Since July 11, 2009 has not yet come around you can extend the warranty by another two years through AppleCare. It costs $69 and is fully transferrable to future owners. The only catch is that you will need to notify Apple of the transfer. Notification is very simple and instructions for the transfer can be found in Section 6 of the AppleCare Plan for the iPhone. With AppleCare protection, whoever buys your iPhone 3G can rest assured that it is completely protected.

Find a Buyer. Third, find a buyer. Ideally, a friend is your best candidate. Otherwise, be patient and use Craigslist if possible. If you can conduct the transaction locally you will save money on shipping and avoid other expenses or complications. If you still have them, get all of your original boxing and documentation together. Clean up your iPhone 3G and photograph it for the Craigslist posting. If you just got the iPhone 3G replaced due to a defect; be sure to mention that fact. If you currently have AppleCare, be sure to advertise that. If you do not have AppleCare, be sure to mention the option (reference the fact that Apple permits transfer). Create your Craigslist advertisement and wait. Hopefully you will find a buyer.

Be Smart. Fourth, be honest to the buyer and be safe. You do not want to get into legal trouble for fraudulent misrepresentations regarding the condition of your iPhone 3G. If you are open and candid with potential buyers they will be more likely to feel comfortable and follow through with the transaction. For your own safety, make sure that you choose a public location because you will most likely conduct the transaction face-to-face. Arrange to meet in front of your local Apple Store during daylight hours. This would be ideal because 1) it is a public place; 2) the buyer can verify the existence of the AppleCare Plan; 3) the two of you could probably even use the Apple Store’s computers (the ones on display) to effectuate the transfer of the AppleCare Plan via email ([email protected] with subject heading: ATTN: Agreement Administration).

Cash Only. Finally, cash is king. Be careful when accepting checks and money orders. Make it clear to your buyer how you expect to receive payment. If your buyer shows up with a payment method other than what you had agreed upon, beware.

If you take the time to sell your iPhone 3G you can hope to recoup up to $400. If you successfully terminate your account and get a great price by selling a recently replaced iPhone 3G, with a little luck, you may even make some money.

Skip the Hardware — Upgrade Your Software

You will save the most money by simply waiting until your contract has been in effect for eighteen months. Remember, the iPhone 3G S is not a huge upgrade from the iPhone 3G and, therefore, you may simply want to wait until Apple releases the next line of iPhones (probably in about a year).

There are relatively few differences between the iPhone 3G and the iPhone 3G S. Most of the new improvements will be coming from the iPhone 3.0 software, not the iPhone 3G S. In fact, it is somewhat misleading that Apple advertises some of the features that will be available to all iPhones through the 3.0 software as being features of the iPhone 3G S. Many of the improvements listed on Apple’s iPhone 3G S website are actually features of the iPhone 3.0 software, not the iPhone 3G S.

Some of the most talked about features such as landscape keyboard, cut, copy, and paste, MMS (not even available until the end of the summer for AT&T users), voice memos, and many other improvements will be fully available to your regular iPhone 3G or 2G on June 17, 2009. All you need to do is download and install the free 3.0 update through iTunes.

The only new features of the 3G S are: improved battery, improved processor (note that the 3.0 software should improve your iPhone 3G’s performance such that you may not find upgrading to the 3G S necessary), a new 3-megapixel camera (one more megapixel than before), video recording, voice control, and a compass.

For those of you that are strapped for time and cash, the wait-and-see approach is ideal as you may find that the features of the new iPhone 3G S are simply not worth the expense or effort. You may find yourself perfectly happy with the 3.0 software upgrade. The software upgrade is free for all iPhones. There is a nominal fee for iPod Touch users.

If you are looking to buy an iPhone 3G S because you have been experiencing problems with your current model, you may find that a warranty replacement coupled with the new 3.0 software does the trick.