In Quito every travel agency and hotel offers 'cheap' tours to the Galápagos Islands, but are these really cheaper than booking them ahead in your home country?
I guess at least you have more options locally.
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First off, it's never going to be 'cheap', unfortunately. There are a few reasons for this.
(*these prices correct as of November 2010)
If you fly, there's no way around the fixed fare of USD$420 to fly return from Quito or Guayaquil. Then there's the $100 National Park entrance fee. And another $10 for taxes. So we'll ignore all that and just call that the 'base', and focus on the rest being cheaper...
A lot seem to focus on the cruise you'll "need" to do. That's not always the case.
From this site:
The airport beside Santa Cruz is on a small nearby island in the north side called Baltera, and from here you must get a 50 cent ferry across, then a $3 bus down south to the town. Once in town, it's very easy to set yourself up with a $20 private hotel room with A/C and TV, and even Wifi! Even out here in the middle of the Pacific ocean you remain connected to your Facebook Wall posts! (or GlobeNotes obviously!)
The volcanic island of Isabella is about 2 hours by boat from Santa Cruz, and boats leave daily for only $25-30. Bear in mind that boats only leave Santa Cruz at 2pm, and then leave Isabella only at 6am, so an overnight is required.
Many people have told me that, with these two islands (Isabella alone being 52% of the total Galapagos landmass) you can actually see MOST of the wildlife that you see on the far off islands that require cruises, the main exception being red-footed boobies and a few other bird species which are only found on the remote islands. Giant-Tortoise, Sea lions, Penguins, and TONS of Iguana. You name it.. you can see them all within about 15 min boat ride from the coast of either Isabella or Santa Cruz. Score!
It's worth noting that according to Wikitravel:
If you are planning to visit the Galapagos Islands, Guayaquil is the cheapest place to take a flight from. There are three air carriers that will take you across the Galapagos Islands as well as the Ecuadorean mainland, LAN-ECUADOR 3, Aerogal 4 and TAME  have non stop daily flights, departing from Guayaquil is cheaper than leaving from Quito(Is closer and most of the Quito flights do make an stop at Guayaquil's airport for Refueling and picking up passengers.
International departure airport tax was just recently increased in Guayaquil and is exactly $29.75 (January 2010). About 15$ cheaper than Quito airport.
Now, once you're in Quito or Guayaquil, there are two sides to consider with tours. One - the travel agents will often claim the best tours are gone months in advance. Certainly some will be, but I've NEVER hard of a person disappointed with their tour, no matter when they booked it.
However, I have heard of some FANTASTIC deals bought on the ground in Quito. When staying at the Secret Garden Hostel in Quito, the Carpedm tour company downstairs was very closely linked with the hostel, offering free city tours and salsa lessons and the like. In addition, they were able to advise people about Galapagos options.
I heard of people getting final berths on 5-star boats for the equivalent of paying 2 days for 7, others getting discounted meals, and they were all booked in Quito or Guayaquil.
So in conclusion, it's hard to say for certain whether things are cheaper on the ground, but from anecdotal opinions, my experience, and the very reason tour companies exist in these cities, is that it is possible to beat prices when on the ground. And of course, this will flex with seasonal trends - more likely to get bargains in low season.