1. Overview

EC2 offers multiple pricing models to optimize cost based on your workload pattern. Choosing the right model is one of the most tested topics on the exam.

2. On-Demand Instances

  1. Pay per second (Linux/Windows) or per hour (other OS)
  2. No upfront payment, no commitment
  3. Most expensive per-hour rate, but most flexible
  4. Launch and terminate anytime
  5. Ideal for: short-term, unpredictable workloads, testing, first-time applications

3. Reserved Instances (RI)

Commit to a specific instance type in a specific Region for 1 or 3 years in exchange for a significant discount (up to 72% vs On-Demand).


RI Options

RI Types

  1. Standard RI: Locked to instance type, Region, OS, tenancy. Cannot change instance family. Can sell on the RI Marketplace.
  2. Convertible RI: Can change instance family, OS, tenancy, and scope. More flexible. Lower discount (~54% vs ~72%). Cannot sell on Marketplace.
  3. Scope: Regional (applies to any AZ in the Region, capacity not reserved) or Zonal (specific AZ, capacity reserved)
  4. RIs apply to usage automatically — no need to "attach" them to instances

4. Savings Plans

Commit to a consistent amount of compute usage ($/hour) for 1 or 3 years. More flexible than RIs.


Savings Plan Types

  1. Compute Savings Plan: Most flexible. Applies to EC2, Lambda, and Fargate. Any instance, family, size, Region, OS, tenancy. Up to 66% off.
  2. EC2 Instance Savings Plan: Locked to a specific instance family and Region. More discount (up to 72%). Can change size, OS, tenancy.
  3. Usage beyond the commitment is billed at On-Demand rates
  4. Savings Plans are recommended over RIs for most new commitments

5. Spot Instances

Use spare EC2 capacity at up to 90% discount vs On-Demand. AWS can reclaim (interrupt) your instance with 2 minutes' notice when it needs the capacity back.

  1. You define a maximum price you’re willing to pay
  2. If the spot price exceeds your max price, your instance is interrupted
  3. AWS sends a 2-minute warning before interruption
  4. Best for: batch processing, data analysis, image rendering, CI/CD, distributed workloads
Important Warning
NEVER use Spot Instances for critical workloads, databases, or anything that cannot tolerate interruption. Spot is for fault-tolerant, flexible workloads only. The exam will try to trick you into choosing Spot for databases — always reject this.

Spot Strategies

  1. Spot Fleet: Request a collection of Spot Instances (and optionally On-Demand) to meet the target capacity. Automatically replaces interrupted instances.
  2. Spot Block (Deprecated): Was used for 1–6 hour blocks. No longer available for new requests.

6. Dedicated Hosts

  1. A physical EC2 server dedicated entirely to you
  2. Most expensive EC2 option
  3. Gives visibility into sockets, cores, and host ID
  4. Required for: Bring Your Own License (BYOL) for software with per-socket/per-core licensing (e.g., Windows Server, SQL Server, Oracle)
  5. Compliance requirements that mandate physical server isolation
  6. Available as On-Demand or Reserved (1 or 3 years)

7. Dedicated Instances

  1. Instances run on hardware dedicated to your account (not shared with other accounts)
  2. May share hardware with other instances from YOUR account
  3. No visibility into physical host details (unlike Dedicated Hosts)
  4. Cannot use BYOL
  5. Cheaper than Dedicated Hosts but more expensive than shared tenancy

8. Capacity Reservations

  1. Reserve capacity in a specific AZ for any duration
  2. No billing discount — you pay On-Demand rates whether you use it or not
  3. Guarantees you’ll have capacity when you need it
  4. Combine with Savings Plans or Regional RIs for capacity + discount
  5. Ideal for: short-term guaranteed capacity for critical events

9. Pricing Models Comparison

Exam Tip
Pricing model questions: "Cheapest but can tolerate interruption" = Spot. "Steady-state 3-year workload" = Reserved or Savings Plan. "BYOL licensing" = Dedicated Host (not Dedicated Instance). "Short-term unpredictable" = On-Demand. "Flexible commitment across services" = Compute Savings Plan. Spot Instances can save up to 90% but NEVER for databases or critical workloads.