Compare an EC2 Reserved Instance against on-demand: effective hourly rate, discount, term savings and upfront break-even.
An RI is a billing discount, not a reservation of a machine, so the honest comparison amortises any upfront payment across the term's 8760 hours per year and adds the recurring hourly charge. Break-even is the point where accumulated hourly savings repay the upfront, which is why a partial-upfront RI on a workload you might retire in six months can lose money even though its effective rate looks better. Reserved Instances are a one-to-three-year cash commitment that keeps billing whether the instance runs or not, so the break-even month is the real risk metric, not the headline discount.
Reserved Instance Savings
effective rate = upfront ÷ (term years × 8760) + reserved hourly rate; break-even months = upfront ÷ ((on-demand − reserved hourly) × 730).
effective rate = upfront ÷ (term years × 8760) + reserved hourly rate; break-even months = upfront ÷ ((on-demand − reserved hourly) × 730). An RI is a billing discount, not a reservation of a machine, so the honest comparison amortises any upfront payment across the term's 8760 hours per year and adds the recurring hourly charge. Break-even is the point where accumulated hourly savings repay the upfront, which is why a partial-upfront RI on a workload you might retire in six months can lose money even though its effective rate looks better.
Reserved Instances are a one-to-three-year cash commitment that keeps billing whether the instance runs or not, so the break-even month is the real risk metric, not the headline discount.
This calculator takes 5 inputs: On-demand rate per hour, Reserved hourly rate, Upfront payment per instance, Commitment term, Instances covered. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.
All-upfront gives the largest discount but the worst flexibility and the longest exposure; no-upfront gives the smallest discount with no cash at risk. Partial-upfront usually sits within a couple of points of all-upfront, which is why it is the common default. Enter your own quoted numbers — the ranking depends on family, region and term.