What price does the renter have to pay if he/she decides to keep the work of art after one year of renting it?
If the renter A would not have rented the work of art, but financed it with a commercial loan (1000 Euro, the value of the work of art) by his bank, he/she would have to pay this loan back in monthly installments. The monthly installments would consist of interest and repayment. Depending on the type of loan interest rates vary, but let us assume an interest rate of 7 %. If renter A now paid 100 Euro to his/her bank (the sum of his/her 12 monthly installments), 7 %, thus 70 Euro, would go into covering the interest, and only 30 Euro (3 %) were a repayment of the total sum of the loan. After one year (and 100 Euro paid to his/her bank) A still owes 970 Euro, because only 30 Euro were used as a repayment. This is why only a fraction of the rent paid can be understood as a down payment, with the total amount depending on the net rent actually paid. Example: commercial value of the work of art is 1000 Euro, renting period is 1 year.
