Savings Plans vs Reserved Instances: What It Is and When to Use It

Definition

AWS Savings Plans and Amazon EC2 Reserved Instances (RIs) are both pricing models that offer significant discounts over On-Demand pricing in exchange for a commitment to a consistent amount of usage for a 1- or 3-year term. The fundamental difference lies in the nature of the commitment: Savings Plans require a commitment to a specific hourly dollar spend, offering flexibility, while Reserved Instances require a commitment to a specific instance configuration, offering the deepest discounts for highly stable workloads.

How It Works

Both models are designed to reduce costs for predictable, baseline usage, a key principle of the AWS Well-Architected Framework's Cost Optimization pillar. However, they apply these discounts in fundamentally different ways.

Savings Plans

Introduced in 2019, Savings Plans simplify cost reduction by moving the commitment from a physical instance configuration to a monetary value. You commit to spending a certain amount (e.g., $50/hour) on compute services for a 1- or 3-year term. AWS then automatically applies discounted rates to your usage up to that commitment. Any usage beyond the commitment is billed at On-Demand rates.

There are two main types for compute:

• Compute Savings Plans: The most flexible option, providing savings of up to 66%. These plans automatically apply to Amazon EC2 instance usage regardless of region, instance family, size, operating system, or tenancy. They also cover usage for AWS Fargate and AWS Lambda. This allows you to modernize your architecture—for example, by switching from EC2 instances in us-east-1 to Fargate in eu-west-1—without losing your discount.
• EC2 Instance Savings Plans: This option offers a higher discount, up to 72%, but with less flexibility. The commitment is tied to a specific EC2 instance family in a specific AWS Region (e.g., m7g instances in us-east-1). Within that family and region, the discount automatically applies regardless of instance size, OS, or tenancy.

Reserved Instances (RIs)

RIs are the original AWS discount model. With RIs, you purchase a reservation for a specific instance configuration, including instance family, size, platform, and region (or a specific Availability Zone for a capacity reservation). If you run an instance that matches these attributes, the discount is applied.

There are two primary types of EC2 RIs:

• Standard RIs: These offer the highest discount (up to 72%) but are the least flexible. You cannot change the instance family, region, or OS. You can, however, modify the instance size within the same family (e.g., from an m5.large to an m5.xlarge). Unused Standard RIs can be listed for sale on the RI Marketplace.
• Convertible RIs: These offer a lower discount (up to 66%) but provide the flexibility to exchange the reservation for another with different attributes, including a different instance family, OS, or tenancy, as your needs change.

Direct Comparison Table

| Feature | Savings Plans | Reserved Instances (RIs) | | :--- | :--- | :--- | | Commitment Type | Monetary ($/hour spend) | Specific Instance Attributes | | Flexibility | High: Compute SPs adapt to changes in region, family, service (EC2, Fargate, Lambda). | Low to Medium: Standard RIs are rigid. Convertible RIs allow exchanges. | | Covered Services | EC2, AWS Fargate, AWS Lambda (with Compute SPs). | Primarily EC2 (separate RIs exist for RDS, Redshift, etc.). | | Maximum Discount | Up to 72% (with EC2 Instance SPs). | Up to 72% (with Standard RIs). | | Management | Simple; discounts apply automatically to eligible usage. | More complex; requires careful planning to ensure usage matches the reservation. | | Capacity Reservation | No. Savings Plans are a purely financial discount. | Yes, when purchased for a specific Availability Zone (Zonal RI). | | Resale Option | No. | Yes, Standard RIs can be sold on the RI Marketplace. |

Key Features and Limits

Savings Plans

• Terms: 1-year or 3-year commitments.
• Payment Options: All Upfront, Partial Upfront, or No Upfront.
• Scope: Compute Savings Plans are region-agnostic and cover multiple compute services. EC2 Instance Savings Plans are region- and family-specific.
• Application Order: If you have both RIs and Savings Plans, the RI discounts are applied first to matching usage. Savings Plans then apply to any remaining eligible usage.

Reserved Instances

• Terms: 1-year or 3-year commitments.
• Payment Options: All Upfront, Partial Upfront, or No Upfront.
• Scope: Can be Regional (more flexible, applies to any AZ in the region) or Zonal (provides a capacity reservation in a specific AZ).
• Marketplace: The Reserved Instance Marketplace allows customers with a US bank account to list their unneeded Standard RIs for sale to other AWS customers. AWS charges a 12% service fee on successful sales.

Common Use Cases

• Modern, Evolving Workloads: Use Compute Savings Plans when you have a consistent baseline of compute spend but need the flexibility to change instance families, adopt newer instance generations, switch regions, or migrate workloads between EC2, Fargate, and Lambda. This is the recommended default for most organizations in 2026.

• Stable, Predictable Workloads: Use Standard RIs or EC2 Instance Savings Plans when you have an extremely stable application where the instance family and region are guaranteed not to change for the entire 1- or 3-year term. This locks in the absolute highest discount for that specific configuration.

• Critical Applications Requiring Capacity Guarantees: Use Zonal Reserved Instances when you must ensure that you can launch specific EC2 instances in a particular Availability Zone, even during high demand. This is the only model of the two that provides a capacity reservation.

• Layered Cost Optimization Strategy: The most effective approach is often a hybrid one. Cover your most stable, predictable core workloads with Standard RIs or EC2 Instance Savings Plans for maximum savings. Then, layer a flexible Compute Savings Plan on top to cover the remaining baseline spend that may change over time.

Pricing Model

Both Savings Plans and Reserved Instances are billing constructs that provide a discount against the standard On-Demand rates. You commit to a term (1 or 3 years) and a payment option (All, Partial, or No Upfront), which determines the discount level. A 3-year, All Upfront commitment provides the highest savings.

With Savings Plans, you commit to a specific dollar amount per hour (e.g., $100/hour). If your actual usage is less than your commitment, you still pay the committed amount. If your usage exceeds the commitment, the excess is billed at On-Demand rates.

With Reserved Instances, you purchase the reservation itself. The cost is effectively amortized over the term. If you don't have a running instance that matches the RI's attributes, the RI goes unused, and the investment is lost for that hour.

To analyze your usage and get personalized recommendations, use the AWS Cost Explorer. To model potential savings, use the AWS Pricing Calculator.

Pros and Cons

Savings Plans

• Pros:
  • High Flexibility: Compute Savings Plans adapt to changes in instance family, region, OS, and even compute service.
  • Simplicity: Easy to manage; discounts are applied automatically across your entire estate.
  • Broad Coverage: Compute Savings Plans cover EC2, Fargate, and Lambda, future-proofing your commitment.
• Cons:
  • No capacity reservation guarantee.
  • The most flexible plan (Compute SP) offers a slightly lower maximum discount (66%) than the most rigid RIs (72%).

Reserved Instances

• Pros:
  • Highest Potential Discount: Standard RIs offer up to 72% savings for a specific, stable workload.
  • Capacity Reservation: Zonal RIs guarantee capacity for critical workloads.
  • Liquidity: Standard RIs can be sold on the RI Marketplace if no longer needed.
• Cons:
  • Inflexibility: Standard RIs lock you into a specific instance configuration, creating a risk of underutilization if your needs change.
  • High Management Overhead: Requires careful forecasting and management to ensure RIs are always matched to running instances.

Comparison with Alternatives

• Spot Instances: Offer the deepest discounts (up to 90% off On-Demand) but can be interrupted by AWS with a two-minute notice. Spot is ideal for fault-tolerant, stateless, or non-urgent workloads like batch processing, CI/CD, and big data analysis. It complements SPs/RIs, which cover baseline usage, while Spot handles interruptible, spiky demand.
• On-Demand: The default pay-as-you-go pricing model with no long-term commitment. It offers maximum flexibility but at the highest cost. It's best for new applications with unknown usage patterns, short-term workloads, and unpredictable traffic spikes that exceed your SP/RI commitments.

Exam Relevance

Understanding cost optimization models is critical for nearly all AWS certifications, especially:

• AWS Certified Cloud Practitioner (CLF-C02): Know the basic difference—Savings Plans are flexible and based on spend, while RIs are for specific instances.
• AWS Certified Solutions Architect - Associate (SAA-C03): Be prepared to choose the most cost-effective solution for a given scenario. The modern, default answer for flexible workloads is a Compute Savings Plan. Recognize that RIs are still the correct choice for capacity reservations or extremely static workloads.
• AWS Certified SysOps Administrator - Associate (SOA-C02): Focus on the management aspect, including analyzing usage in Cost Explorer to make purchase recommendations and monitoring RI/SP utilization.
• Professional & Specialty Certs: Expect nuanced questions involving hybrid strategies, the RI Marketplace, and how different models apply in complex, multi-account organizations.

Frequently Asked Questions

Q: Can I use both Savings Plans and Reserved Instances at the same time?

A: Yes, and this is a common strategy. AWS has a clear application logic: for a given instance, it will first apply any matching Reserved Instance discount. If no RI applies, it will then apply a Savings Plan discount. This allows you to use RIs for ultra-stable workloads and cover the rest with a flexible Savings Plan.

Q: What happens if my usage is less than my Savings Plan commitment?

A: You are still responsible for paying the full hourly commitment for the duration of the term. For example, if you commit to $20/hour but only use $15 of compute in a given hour, you will be billed for the full $20. This is why it's crucial to analyze your baseline usage in AWS Cost Explorer and commit to a level you are confident you will consistently exceed.

Q: Which is better for a new application with an unknown usage pattern?

A: Neither. For a new application, you should always start with On-Demand pricing. This gives you the flexibility to scale and change your infrastructure without being locked into a long-term commitment. After running the application for a period (e.g., 30-60 days), analyze its usage patterns in AWS Cost Explorer. Once you identify a stable, predictable baseline of usage, you can then confidently purchase Savings Plans or Reserved Instances to cover that baseline and optimize costs.

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This article reflects AWS features and pricing as of 2026. AWS services evolve rapidly — always verify against the official AWS documentation before making production decisions.