My advice is to first think about what you want to do with the guitar. If you want to play classical music, get a classical guitar. If you want to back up fiddlers or jam with other musicians, I'd say get a steel-stringed guitar. If you want to learn so you can play by yourself, get a smaller body instrument. If you want to jam and be heard, larger.

You probably have a short-list of guitar players that you admire. What types of guitars do they play? If you get a chance to be at a music party with lots-o-guitars, ask to play as many of the different guitars there, and ask the players why they play that guitar. You can also play many guitars at a music store, but that can be somewhat overwhelming if they have hundreds of them.

Here in the US, you can pick up a new, cheap steel string guitar for a couple hundred dollars (Robelli is the brand I've seen) and they sound new and cheap. I doubt that you could get that money back, if you wanted to sell it or trade up. My advice is to spend the money for quality, and you'll be able to get your money back. Look into quality used instruments...as with violins, you can pick up very playable instruments that may have been abused (scratched up) for reasonable prices. But these should be inspected for any structural problems.

Hope this helps,
-Greg