What Commitment Terms Are Offered for EC2 Savings Plans?

Amazon Web Services offers two distinct commitment term lengths when purchasing Savings Plans for Amazon EC2, which are a one year term and a three year term. Choosing between these two commitment periods allows organizations to balance their desire for maximum cost savings against their need for long term infrastructure flexibility. Both options require committing to a consistent amount of compute usage measured in dollars per hour, and they apply to both Compute Savings Plans and EC2 Instance Savings Plans. This guide explores the differences between the one year and three year commitment terms, how payment options affect your total discount, and what happens when your term expires.

Available Commitment Term Lengths

When you configure an Amazon EC2 Savings Plan in the AWS Cost Management console, you must choose how long you will commit to your specified hourly spend. AWS strictly provides two term durations:

• 1-Year Term: Commits your account to a fixed hourly spend for 365 days (366 days in a leap year), which equals \(8,760\text{ hours}\) of continuous usage.
• 3-Year Term: Commits your account to a fixed hourly spend for 1,095 days (1,096 days if including a leap year), which equals \(26,280\text{ hours}\) of continuous usage.

AWS does not offer shorter commitment windows (such as monthly or six month terms) or intermediate lengths (such as a two year term) for Savings Plans. Once a Savings Plan is purchased, the commitment term cannot be canceled or shortened.

1-Year Commitment Term

A one year commitment term is designed for workloads that have predictable baselines over the near term but may undergo architectural changes, migrations, or demand shifts after twelve months.

Discount Rates and Savings

With a one year term, you can typically save up to 40% to 50% compared to standard On-Demand EC2 pricing, depending on the instance family, AWS Region, and the specific type of Savings Plan selected (Compute Savings Plan vs. EC2 Instance Savings Plan).

Ideal Use Cases

• Projects with an annual budget cycle where financial commitments cannot extend beyond the current fiscal year.
• Evolving applications that might migrate to newer instance generations, serverless architectures, or different platforms within 12 to 18 months.
• Organizations adopting AWS Savings Plans for the first time that want to validate their usage patterns before locking in a multi-year agreement.

3-Year Commitment Term

A three year commitment term offers the deepest discounts available for Amazon EC2 in exchange for a longer financial commitment.

Discount Rates and Savings

By committing to a three year term, you can achieve savings of up to 66% with Compute Savings Plans and up to 72% with EC2 Instance Savings Plans compared to On-Demand rates.

Ideal Use Cases

• Steady-state production workloads, core databases, and enterprise applications with well-established, long-term resource requirements.
• Organizations using Compute Savings Plans, which automatically apply across changing instance families, sizes, operating systems, tenancies, and AWS Regions—even if the workload shifts from Amazon EC2 to AWS Fargate or AWS Lambda over the three year span.
• Businesses focused on maximizing long-term cloud cost optimization for their foundational baseline compute usage.

How Payment Options Interact With Term Lengths

For both the 1-year and 3-year commitment terms, AWS provides three payment structures that further influence your discount rate and cash flow:

1. All Upfront: You pay for the entire 1-year or 3-year commitment in a single payment at the time of purchase. This option provides the highest discount rate for the selected term length. The total upfront cost \(C_{\text{total}}\) for an hourly commitment \(r\) over \(H\) total hours in the term is calculated as: \[C_{\text{total}} = r \times H\]
2. Partial Upfront: You pay at least 50% of the total commitment cost upfront, and the remaining balance is billed in equal monthly installments over the 1-year or 3-year term. This provides a slightly lower discount than All Upfront.
3. No Upfront: You pay nothing at the time of purchase. Instead, your commitment is billed in equal monthly installments over the entire duration of the 1-year or 3-year term. While this offers the lowest discount of the three payment options, it still provides substantial savings over On-Demand pricing and preserves capital.

Comparing 1-Year and 3-Year Terms Across Plan Types

The commitment term length you choose works alongside the specific type of Savings Plan you select:

Note that if you choose a 3-year EC2 Instance Savings Plan, you are locked into a specific instance family (such as m6i or c7g) in a chosen AWS Region for all three years. If you want a 3-year discount without being locked into a single instance family or Region for three years, a 3-year Compute Savings Plan is generally preferred because it automatically shifts with your usage across families and Regions.

What Happens When the Commitment Term Ends?

When your 1-year or 3-year Savings Plan reaches its expiration timestamp, the plan automatically retires and your EC2 usage reverts to standard On-Demand rates unless another active Savings Plan or Reserved Instance covers the capacity. You can configure AWS Cost Explorer alerts to receive notifications 7, 30, or 60 days before a term expires, or enable auto-repurchase rules via queued Savings Plans so that a new 1-year or 3-year commitment starts the moment your existing plan ends.