for < US $250, you can buy playable solid body electrics from Yamaha, Ibanez, Peavey or Axl, new. For $100 you'll find something that's tolerably playable on Craigslist in most large markets.
There aren't other "real" instruments that can be mass produced like this in a few factories in China and Indonesia.
An oddity of guitar is the way a cheap guitar affects one's ability to learn.
In most any endeavor, it's true that working on your skills is much more important than upgrading your equipment: practice is the way to improve, you can't buy your way into being better.
But this is significantly less true at the bottom end of the guitar spectrum. Cheap guitars really are worse -- not just in the quality of their sound or their durability, but in their playability. It is much more difficult to get a really cheap guitar to work right. A $100 guitar is going to be much more difficult to play than a $500 one.
That's primarily due to the "action" -- the height of strings above the frets. On a cheap guitar, the (im)precision of the components -- the bridge and its springs, the neck tension bar, etc., conspire to make it so that the higher frets have much higher action (or else the lower ones buzz). That forces the player to squeeze the strings harder to the neck, which is painful, and is less forgiving about finger placement within the fret, requiring that fingers go closer to the fret rather than allowing more space behind it.
The end result is that a new player, not wanting to invest too much money in something that he doesn't know if he'll like, is more likely to be discouraged and give up. If he'd had a better tool from the beginning, success would have been more likely.
This might have been true about five or ten years ago, but CNC machines have really revolutionized the cheap guitar industry. The cheapest Squire strats today are on par with what you would have paid over $600 for ten years ago.
I've owned a lot of cheap guitars, starting with a plywood no-name electric, and I wish the stuff that's available today had been there 25 years ago.
You are correct. I've spent a lot fo time in instrument shop, craigslist and pawnshops (California, Seattle, Ohio, Wisconsin), looking at pianos, fluets/sax/clarinets and double bass/cellos, in addition to guitars and bass guitars. I'd consider Ebay if the seller has refund policy
Most of the cheap guitars are not worth buying, especially for fretwear, warped necks, wonky trussrods or poor neck routs in the body. I also tell people to avoid cheap Floyd Roses, active electronics and 5 string basses (poor tension on low B
Addendum: i have a Korean Squier strat ($79.95) and a Samick fretless bass ($220) that I'm very fond of. I have another cheap guitar and bass that are just meh.
Also i'd add Squier Classic Vibes to the list of mfrs with at least passable QC but not their Affinities
When I started with guitar, I said to the guy "I'm not sure if this is a phase or not, let me try the cheapest guitar in the store". He tuned it, walked all of five meters around the counter to hand it to me, I strummed it, and even with my unmusical ear, I could tell it was already out of tune. "I think I'll try your second-cheapest guitar!"
I also had a 'guitar god' friend with me that day, and I thoroughly recommend taking a friend who can play along to buy your learner instrument.
Having a knowing friend is the only real way to shop for a guitar. I was lucky at the time when I was starting that I had my brother-in-law help me choose between the cheap guitars and we found something for under $100 that sounded "good enough". Straight away he told me: "start with this, if you don't get bored in 2 months sell it and buy a $300 guitar".
Failing that, you can head to a small music shop where the guys selling (sometimes they have an in-store technician) can give lend you a hand at choosing something worth your money. Never buy your first instrument from a big shop where the guy behind the counter doesn't know shit.
I've only played acoustic and I'm still a beginner, but I believe I've encountered this with my (cheap) guitar - after trying a friend's higher-grade guitar I was shocked at how much easier it was to play. I've found that a capo mitigates most of the pain, as well as making it sound less "muddy", if that makes sense. Also, now I have giant finger callouses from pressing down so hard. :)
There aren't other "real" instruments that can be mass produced like this in a few factories in China and Indonesia.