Certification is costly

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I agree with your distaste, but the characteristics of the LDS market might support what he did economically (if not morally).

1.) If the business model relies on gear set sales to new divers, and not a lot of repeat business, then a focus on 'value for customer' may not pay off long-term as well as, oh, say, selling a car to someone who comes to you a few years later when the family needs another.
My understanding is that many shops are mills, relying on sales of mask, fins, and snorkels (and in my area, gloves) to keep the lights on. Classes are poor, but many come through in order to dive in a tropical location.
2.) 'Crap' gear doesn't necessarily mean unsafe or miserable. Analogue gauges, worn looking BCD, not weight-integrated, ratty-looking wetsuit, unintuitive cheap dive computer - it might not look good sitting next to a shiny brand-new ScubaPro gear package, but could work fine for checkout dives.
At one shop where I taught, the poorly breathing regulators were a major source of stress. After certification, I put a student in my gear, including a BP/W. After the dive, I asked him how much he liked the BP/W versus a BCD. He said "I don't know but I love how this thing [regulator] breaths!"
Analogous situation - let's say a car dealership offered driver's ed. classes. They might use a rough-looking old 'beater' car for road instruction, unless the student brings a car. That old beater might work fine for driving (maybe the AC and radio are out).

3.) Cognitive bias may be in your favor. Once students buy the gear, they can admire it and view themselves as the proud owners of high quality gear (after all, deep down, don't you want the best?), or as gullible fools who got taken.

I'm not approving of what the guy suggested. If I were a student and learned what he was doing, I might take their classes but buy my gear off the Internet.
The shops that provide quality gear and training in my area, seem to be healthier with more repeat business, more income per customer, than those that try to fleece as much as they can, as they rely on volume, as they have so few repeat customers.
 
Expensive is relative. Try motorsports racing or flying.
I fly Paramotors and they are a little more expensive, about 7-12k new and the wings cost about 3k. The majority of my scuba stuff I bought used. A bcd for $75, a tank our of hydro, reg and gauge set all for $100. I did rebuild everything but they had less than 20 dives on it. I then got a 7mm wetsuit in great condition at play it again spots for $40. So it can be done with some patience. There is a lot of lightly used stuff out on the market. Heck I got a Neptune full face mask with comms for $200.
 
Certification may be expensive, but learning to dive isn’t. Unless you insist on consulting an instructor to show you how to put a suit on or take a breath from a regulator. You can learn to dive very cheap but you can’t do it in a week. Practice is the key.
 
And people wonder why I think so many diver shops are shonks! Dive course cost by OP is reasonable considering I paid AU$400 33 years ago, but you should not need to buy anything but your mask and perhaps fins for your course.
 
And people wonder why I think so many diver shops are shonks! Dive course cost by OP is reasonable considering I paid AU$400 33 years ago, but you should not need to buy anything but your mask and perhaps fins for your course.

It’s pretty common for US students to have to provide mask, fins, snorkel, and booties. OP is in a cold water location, wants to do drysuit diving, and bought a drysuit as the rental didn’t fit. Not sure on the other gear he bought.
 
I paid in excess of $800.00 for eLearning, OWC, Drysuit and Nitrox Computer certification. The cost included 4 paid pool sessions. I had to buy a different BCD, Mask and Fins using 3 of the 4 pool sessions without any skills training. I am paying $50.00 for 2 hour weekly pool session not knowing how I have to pay before I can begin open water training.

Not knowing the total cost of pool sessions and the length time it will take is disturbing. It’s like throwing money to the wind not knowing where it will land. Other than this I have no complaints.
That's a reasonable price for those certifications considering your area, nearly in Canada, probably low demand, and far from any ocean. Drysuit diving is the norm up there most or all year. My local shop would have charged $1200 for those classes. Nearly everyone gets nitrox, and I did my ice diving course in your neck of the woods so dry suit is certainly appropriate.

What are you doing during your pool sessions if you're not doing skills? Are you sure you're actually using your allotted pool sessions if you're not doing any skills? It takes us two 4-hour pool sessions to teach skills for OW, drysuit would be an extra pool session. If they are charging you for each, then I suggest asking how many sessions come with OW and how many with drysuit. Most instructors are making less than minimum wage in the end, so if an instructor is working extra class sessions specifically for you its not unreasonable for them to ask you to pay for extra classes. My local shop would work you into subsequent scheduled pool classes so instructor isn't really spending any extra time total; you would repeat pool skills until you're comfortable going to OW.

Even down here near DC we'd suggest those classes if a student wanted to be certified locally over the winter.

Sam
 
So what is the consensus-- Do more (most?) places charge main equipment rental fees for OW courses (including making it part of the overall course fee), or do more (most) let the students use this stuff free?
 
So what is the consensus-- Do more (most?) places charge main equipment rental fees for OW courses (including making it part of the overall course fee), or do more (most) let the students use this stuff free?

I know my LDS includes gear, including air, during the confined portion and gear during the check out dives. During check out dives the student is responsible for entry fees to the Quarry and air fills.
 
I once attended a week-long workshop for our dive shop that presented ideas for improving the dive shop's bottom line. One suggestion was to provide high quality gear throughout the pool sessions and then rent crap gear for the OW dives. The idea was that if the students knew that doing their OW dives with good quality equipment would require them to purchase their own, they would be more likely to purchase a full set of gear prior to their OW dives. Students would be pressured (subtly and not-so-subtly) throughout their pool sessions to buy a full set of gear before certification.
The way I was forced to buy my gear was when I signed up for AOW. I rented prior to that for my OW and some beach dives.
Then I signed up and paid for AOW and when I walked in to the LDS the day before my class wanting to rent my stuff they told me they were having a really busy weekend coming up with several OW classes happening and everything was rented out. So I was forced to buy a BC and full reg set right then.
I already had everything else like wetsuit, hood, booties, gloves, mask, fins, weightbelt, etc.
That was back when we were still using tables so at least I didn’t need to buy a computer.
But it still set me back what I thought was a lot of $$$$ in 1999.
The reg set was a Scubapro Mk 20/G200b ($365) with an Air2 ($199) and a console with Suunto compass, SPG, and manual depth gauge ($150)
The BC was a Seaquest Black Diamond ($600) which was top of the line and most expensive BC then.
The only thing I have left and still use from that initial purchase is the MK20/ G200B. The rest has all been sold off and upgraded through the years.
 

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