Reservation cost for the FIRST MONTH

Question

If I purchase a reservation (say for a VM) on 29-Feb-2024, with monthly payment option, shall I be charged 1 day's prorated cost for the reservation, or the entire amount for the month of February, in the upcoming bill (even though the reservation benefit will be applicable only for 1 day of the month).

Answer 1

Hello, @Bis Mandal !

If I purchase an Azure Reservation in the middle of the month, how am I charged with the monthly payment option?

The amortized cost of the reservation is divided by the number of days in the year (365 or 366 on a leap year), and then spread from the date of purchase (February 29th here) to the end of the reservation (February 28th of next year in this case). The daily cost is the same but the monthly cost will vary because of the number of days in the month.

This is how Azure calculates amortized costs on Azure Reservations:

https://learn.microsoft.com/en-us/azure/cost-management-billing/reservations/view-amortized-costs#how-azure-calculates-amortized-costs

To understand how amortized costs are shown in cost analysis for reservations, let's look at some examples.

First, let's look at a one-year virtual machine reservation that was purchased on January 1. Depending on your view, instead of seeing a $365 purchase on January 1, 2022, you'll see a $1.00 purchase every day from January 1, 2022 to December 31, 2022. In addition to basic amortization, the costs are also reallocated and associated to the specific resources that used the reservation. For example, if the $1.00 daily charge was split between two virtual machines, you'd see two $0.50 charges for the day. If part of the reservation isn't utilized for the day, you'd see one $0.50 charge associated with the applicable virtual machine and another $0.50 charge with a charge type of UnusedReservation. Unused reservation costs can be seen only when viewing amortized cost.

Now, let's look at a one-year reservation purchased at some other point in a month. For example, if you buy a reservation on May 26, 2022 with a monthly or upfront payment, the amortized cost is divided by 365 (assuming it's not a leap year) and spread from May 26, 2022 through May 25, 2023. In this example, the daily cost would be the same for every day. However, the monthly cost will vary because of the varying number of days in a month. Also, if the reservation period includes a leap year, costs for the leap year are divided evenly by 366.> Because of the change in how costs are represented, it's important to note that actual cost and amortized cost views will show different total numbers. Depending on your view in Cost analysis, the total cost of months with a reservation purchase will decrease when viewing amortized costs, and months following a reservation purchase will increase. Amortization is available only for reservation purchases and doesn't apply to Azure Marketplace purchases currently.

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