Yes, it's better to compact before it gets out of cache. I think new versions of Claude Code can do that automatically. It can be cheaper if you switch to Haiku or something

You could use a dumber model (luna or haiku) for compact to get around this

You are correct, the first turn costs about the same either way, the difference comes after. Without compacting, every later turn re-reads the non-compacted context, and after compacting it reads a short summary.

So it only pays off if the session goes on. In my own dogfooding tests, I compacted 47 times out of 50 it had suggested.