Apple has started selling refurbished iPhone handsets for $100 less than the cost of a new model.

The phones will still require a two-year supplier subscription, and are guaranteed free of scratches or dents. They are also covered by Apple's one-year warranty.

The provenance of the phones is unclear, although it is believed that many are returns from those who bought large numbers with a view to selling them on eBay.

Another source could be from Apple staff who declined their free iPhone and handed it back. A few of the handsets may also be returns that came back with faults and had to be rebuilt.

Apple chief executive Steve Jobs has said that he wants to sell a million iPhones by the end of September, but initial sales have been below expectations.