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How do you estimate the true cost of self-hosting an LLM versus paying per-token API?

The per-token sticker price hides the real decision. Self-hosting only wins past a volume break-even most teams misjudge. Here is the back-of-envelope a staff engineer does on the whiteboard.

Updated Aug 2026 · Grounded in real Applied AI Engineer interview loops and written to a senior-engineer editorial bar.

The per-token sticker price hides the real decision. Self-hosting only wins past a volume break-even most teams misjudge. Here is the back-of-envelope a staff engineer does on the whiteboard.

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