Buying your first guitar can be a daunting experience for the new guitarist. Music shops have so many guitars it's difficult to know which will suit. My advice to beginners is to get a classical nylon string guitar for a minimum $150, and to upgrade as you advance. Anything cheaper than this is likely to be a source of problems, although you might be able to get something ok on sale. Once you feel confident that you'd like to continue guitar lessons you can upgrade to something in the range of $500 & then $1000. After this it's best to ask the advice of your guitar teacher first. Unless you know what you're doing avoid taking the risk with a used guitar & buy a brand new one with a warranty.
Nylon Strings vs. Steel Strings
The fingertips of a beginner are still soft and can get quite sore until they toughen up. Steel strings make this problem worse in that the strings are skinny and tend to dig into the fingertips more. A classical guitar uses nylon strings which are fatter and will toughen the fingertips up without causing so much discomfort. In addition to this, the classical guitar has a wider fingerboard which makes it easier to play, especially when playing chords.
As a general rule, a good guitar will have a deep, rich, mellow sound, whilst a bad guitar will have a thin, tinny sound. A mellow sound is rich in low harmonics and has a more powerful sound that will carry further, even if it appears softer. A tinny sound has more emphasis on it's upper harmonics and has less power, although it may seem louder due to its shrillness. Remember, when the neighbours have a party it's not the high pitched sounds that keep you awake all night, but the low booming sound of the bass - bass harmonics are what project & travel. Another characteristic to look for is the resonance of the instrument - does the sound seem vibrant?