I beg of you: Don't buy your guitar at Costco.
Another vote for Yamaha if you don't want to spend a lot of money. Be sure to play it first. Also, just because it looks cool with abalone and pearl inlays all over it and gold plate, etc. doesn't mean it sounds better than a guitar with simple adornments. A very plain guitar with solid top will often sound better than a fancy guitar for the same price but with a plywood top. A plain guitar never goes out of style! Neither does good sound. Remember that any extra materials or adornments are going to cost you either way, either in quality of manufacture and tone (if it is the same price as a simpler-looking guitar) or in $$$.
Things to check for:
Straight or *very* slightly bowed neck. No humps or high spots. If you can, use a long straight ruler and lay the sharp edge along the fingerboard over the frets and check it. Or, hold down the low E string at the first fret and the last fret and use the string as a "guide" to see if there are any humps in the fingerboard. A twisted neck is an absolute no-no. Guitar companies will often let guitars leave the factory with terrible, terrible flaws. I own a $3500 guitar whose fingerboard had to be completely re-shaped. Luckily it was under warranty, but it took almost three months to repair.
Clean fret work. Run your fingers along the sides of the neck and feel for burrs or sharp edges on the frets. A couple of scratches or cuts from bad frets will make you put the guitar down for a long time and never pick it up again. With all the time it takes to develop skills it is something that should be a pleasure, not a danger.
Look for a solid wood top. A solid wood top will continue to sound better and better over time. Plywood tops are pretty much one sound for the entire life of the guitar. If you think HP burn-in is significant, wait until you hear the "burn-in" of a solid spruce top guitar. It takes longer, but it never stops sounding better!
Tap the guitar *lightly* at various places on the top and back while holding the guitar by the neck. Listen for rattles or dull thuds. This will indicate the condition of the braces. Rattles or thuds indicate loosened or poorly glued braces. It will thud toward the top of the soundboard because there is not enough space for the wood to resonate. But near the bridge, there should be some open reverberation.
Check the action. If the saddle height looks normal and the action on the strings is too low or high this means the neck was not set properly and will cause you problems over time.
Do your research.
www.frets.com is a good place to check out some basics of guitar buying and selection. Gryphon Stringed instruments
http://www.gryphonstrings.com/ is in Palo Alto. Is that near you? They will probably not steer you wrong. There is also a nice repair section that will show you some of the problems you might encounter if you don't care for your guitar.
Obviously play the guitar. Look for one that is easy to play without any buzzing on on fretted notes. Any guitar will buzz if you mash the strings. I'm talking about normal plucking, strumming strength. Also, buzzing on open strings is unacceptable. Be careful of "sales people" who act like they know what they are doing. Don't buy on your first visit. If you find a couple that you think you can live with, ask them to re-string them so you can play them with good strings. Sometimes the less expensive guitars can be left with old, dead strings on them and you can't really get a good idea of the tonal quality.
Guitars are extremely inconsistent. It is really hard to find a good one at your price point, but if you have patience and do your research you will find one that will last you forever. Again, these things are made of wood and glue. They change according to humidity and temperature as well as all kinds of other factors (people also abuse them at the stores).
I'm probably forgetting a lot of stuff, but this should get you started. Do a quick google search for acoustic guitar buying guide and you'll find some good resources.
Often, used is better than new. Your guitar won't be perfect forever unless you never play it. It is a living, breathing thing that is handled a lot. Don't worry too much about nicks and the like unless you spend crazy $$$.
Finally, try to borrow a guitar from a friend and play it for a while so you can get somewhat acceptable technique. Sometimes when testing a guitar, the sound flaws that one attributes to the guitar can be attributed to "user error"! So make sure you are fretting the guitar properly when you play it.
In fact, try to find a guitar to borrow to find out of you like it at all and then save up so you can spend at least $400 for your first guitar. There are A LOT of $400 guitars that can last a lifetime and will stay with you even if you become the greatest guitarist in the world.
J.
