I am new to aws and I trying to understand what reserved instances are. I am searching for available p2.xlarge reserved instances and this is the screenshot of available options for 1 year enter image description here

Option1) It says that the upfront price is $5022.00 and Effective rate is $0.573. Does that mean I get 5022.00/0.573 = 8764 hours ? and after finishing 8764 hours will it be on-demand pricing ?

Option2) It says that upfront price is $2562.00.Does it mean I get 2562.00/0.584 = 4386 hours ? What is the difference between effective rate and Hourly rate

Option3) It says that I don't have to pay any upfront price but the effective rate is $0.684.Does it mean I will get charged with $0.684 for every hour I use for the next 1 year ? , How is this different from on-demand instance ?

What options do you recommend If I need like 1000-1500 hours of p2.xlarge instance for the next 1 year?

Thanks in advance

  • On option 3 the difference is that it is cheaper, but if you don't use at least 24 hours a day you will still get charged for 24 hours of usage. If you aren't running your server 24 hours a day you might want to look into spot instances instead of reservations. – mbaird Mar 28 '17 at 17:59
  • Did you read the documentation? – ketan vijayvargiya Mar 28 '17 at 21:05
  • Hi @MarkB, thank you for replying, currently our team is in a position where we can pay around $800-$1000 upfront.What kind of p2.xlarge instance can you recommend ?. The problem with Reserved instances is it is way above our budget(Apparently they only offer 1yr or 3yr deals) and I'm not sure if there is upfront payment in spot instances. – Ravi Teja Mar 28 '17 at 21:10
  • Hi @ketanvijayvargiya, I read the pricing for spot instances but it doesn't have stopping option.It only has terminate option.When I terminate an instance everything will be deleted right ? – Ravi Teja Mar 28 '17 at 21:50
  • 0.584-0.292=0.292 (hourly rate from upfront price), then 2562/0.292=8774 hours per year which (assuming rounding) is almost the same as the first line – Putnik Mar 29 '17 at 7:12

When you purchase a reserved instance, you are committing to pay a certain amount now, and a certain hourly price each hour for the next year. Very important: the hourly price will be paid regardless of whether a matching EC2 instance is running or not.

Here's the breakdown of the p2.xlarge options: (assuming 8,760 hours per year)

Option 1: Full upfront

You will pay $5,022.00 now, and $0.00 each hour for the next 12 months.

Total after 12 months: $5,022.00

Option 2: Partial upfront

You will pay $2,562.00 now, and $0.292 each hour for the next 12 months.

Total after 12 months: $2,562.00 + $0.292 x 8,760 = $5,119.92

Option 3: No upfront

You will be $0.00 now, and $0.684 each hour for the next 12 months.

Total after 12 months: $0.00 + $0.684 x 8,760 = $5,991.84

Option 4: Only use OnDemand

Instead of buying a reserved instance, you could simply pay the OnDemand price for your instance.

The OnDemand price for a p2.xlarge instance in us-east-1 is $0.90 per hour. If you are planning on using 1,500 hours, then your cost would be $0.90 x 1,500 = $1,350.00.

None of this will be paid up-front. All will be paid month-to-month as it is used.


Your best bet it to not purchase a reserved instance, and instead just use the OnDemand pricing.

Sometimes, OnDemand is cheaper compared to reserved instances. That is, as long as you turn off the instance :)

Additional Notes:

You could save more using spot instances, but the pricing for that fluxuates, and the instances cannot be terminated.

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