API vs Self-Hosting an LLM: How to Calculate the Real Break-Even Point

Teams using large language models often debate whether to continue paying per-token API fees or switch to self-hosting, but the decision is rarely backed by rigorous analysis. The core trade-off is that APIs offer flexible, usage-based pricing ideal for low or unpredictable workloads, while self-hosting converts costs into a largely fixed expense that becomes economical only at high, sustained token volumes. Key variables in the calculation include monthly token usage, input-to-output ratio, GPU costs, utilisation rates, and often-overlooked engineering overhead such as maintenance and on-call time. Data privacy requirements can override cost considerations entirely, since organisations handling regulated or confidential data may be compelled to self-host regardless of token economics. A break-even calculator tool has been released to help teams model API versus self-hosting costs over a 12-month period without requiring sign-up.