Have you read this page : http://aws.amazon.com/ec2/pricing/ http://aws.amazon.com/ec2/pricing/ The first sentence under Reserved Instances is : Reserved Ins

Have you read this page : http://aws.amazon.com/ec2/pricing/ http://aws.amazon.com/ec2/pricing/ The first sentence under Reserved Instances is : Reserved Instances give you the option to make a low, one-time payment for each instance you want to reserve and in turn receive a significant discount on the hourly charge for that instance. In the table below you'll see that for each type of reserved instance there's an Upfront column followed by an Hourly column. To get your total annual cost for 100% utilization you would presumably add the 1 yr upfront cost to the hourly rate multiplied by the number of hours in a year (8760). You'll find that the total cost for a reserved instance is significantly less than that for an on-demand instance (where the upfront cost is zero but the hourly rate is higher).