Self-Hosting an LLM vs Using an API: Which Is Cheaper?
Self-hosting trades a per-token API bill for GPU rental you pay whether or not you use it. Which wins is a utilization question: APIs suit spiky low volume, self-hosting suits steady high volume.
Fixed cost vs marginal cost
A rented GPU costs the same idle or busy, so its economics depend on utilization. APIs charge only for tokens, so they are cheaper when traffic is low or bursty and there is nothing to keep a GPU busy.
Find the crossover
Estimate your steady token throughput and compare API spend at that volume against the hourly cost of GPUs that could serve it. High, predictable load usually crosses over to self-hosting; everything else favors the API.
Calculators for this topic
Frequently asked questions
Is self-hosting an LLM cheaper?+
Only at high, steady utilization where flat GPU cost beats per-token API pricing — low or bursty traffic favors the API.
What is the break-even?+
Where your API spend at steady throughput equals the hourly cost of GPUs able to serve that throughput.