Anything over $500 is too much to spend on a guitar for most people
At the time I write this in March 2014, there are a ton of guitars that are priced exactly at $399.99, which basically means $400. When you add in tax and shipping, that usually means you end up spending anywhere from $424 to $475. Being that Amazon has free shipping on an item this price, US buyers can grab a $399.99 for as little as $424. For dudes outside the US, cost goes up because of shipping but usually stays under the equivalent of $500 USD.
Unofficially, $400 is the cutoff limit for what most players are willing to spend on a guitar, because you have to allow for a $100 buffer to keep it under $500.
Fortunately, this does allow you to go into Fender-branded guitar territory. Most Modern Player Series guitars such as the HSH Stratocaster seen above is a $399.99 guitar.
Yes, the Modern Player series from Fender is China-made. But it is Fender. I did own one of those Strats (this one, specifically), and can honestly say that yes, it is a well-made, properly constructed series of guitars.
If you're going to spend over $500 for that American-made guitar, you might as well do it now
American-made guitars are not made any better than ones made in Mexico, Japan, Korea, Indonesia or even China at this point...
...but that doesn't take away the desire to own one.
Many players living in countries outside the USA would do almost anything even to touch a USA-made Fender or Gibson guitar, let alone play one.
And then there's me, a guy living in Tampa Bay Florida, who can waltz into a Guitar Center any day of the week and play US-made Fenders or Gibsons.
While I sometimes bash on American-made Fender and Gibson axes, I am very aware of how accessible US-made guitars are to me, simply because I live here.
On top of that, I live in an area where a lot of the super-good American guitars end up, as Tampa Bay does have several high-traffic guitar shops.
Basically what I'm saying is this: If you live somewhere where you absolutely cannot get to American-made guitars, the non-American stuff is just as good and you are not missing anything. Bear in mind this is coming from a guy who can access those high-cost American guitars any day of the week.
Now I know that no matter what I say here, a bunch of you are going to buy an American-made Fender or Gibson one day. It will happen.
I've gone through that phase where I had to have an American guitar and got one. Been there, done that. Will I ever buy American again? Doubtful. Right now at this point in my guitar playing life, I am all about the non-American guitars because I get more enjoyment out of them.
You will buy an American-made guitar just to do it because it feels like an accomplishment. You will put down a bunch of money (at least $1,200 USD or more) and buy that guitar...
...and then you'll probably never do it again. Not because of lack of build quality or anything like that. It's because you did it once and don't have to do it again, because let's face it, it's expensive.
If you have the money, get your American Strat (I suggest getting one in Jade Pearl Metallic with the maple board) or Gibson USA Les Paul (I suggest Honey Burst, which I think is the best burst Gibson does) or whatever it is from Fender or Gibson that you want.
And yeah, I'm saying Fender or Gibson. Those are the two brands you're willing to put big money into for an electric.
Buy it now, because the price is only going to go up as times goes on. Just buy the stupid thing and get it out of your system.
After you've spent your cash on that American guitar...
...you go back to under-$500 guitars and pretty much stay there.
Staying under $500 on the purchase of a new guitar is not being cheap. It's being smart.
Most guitar players eventually figure out that an American-made guitar is not an upgrade. It's just a more expensive guitar. But that doesn't mean you're not going to buy that American guitar. It's like I said, you will do it. It will happen.
Should you buy a used American guitar?
Not unless you are really, really sure the guitar is OK to buy.
There are two main reasons you shouldn't buy a used American Strat or Les Paul ordinarily.
First, most guys who bought these guitars new originally knew nothing about how to set one up correctly. They also don't know how to maintain a guitar correctly either. As such, they will f--k it up. Whoever buys the guitar afterward is going to buy something that is f--ked up.
Second, it's basically impossible to know whether you're getting a 100% original USA guitar or not when buying used.
Do guys swap out the original pickups and put in cheap pieces of crap? Yes, and often. They do this so they can sell two things instead of one. The guitar is sold, then the pickups are parted out and sold separate for extra cash.
Do guys put American necks on Squier or non-Fender bodies? Yes, and often. And there's no real way to check the authenticity of a guitar body. Everyone pays attention to the neck.
If you're going to buy American, buy brand new. Don't do scratch-and-dent, don't do used. Go new 100% all the way.
Yes, it's expensive. But it's the only guaranteed way to get a USA-made guitar that is 100% USA-made in every way.
You can go used if you want, but just be really careful about it.
If you can't afford the full price of a new USA model, the solution is simple. DON'T BUY IT. Get a Squier or Epiphone instead for cheap now (or the China-made Modern Player Fender I noted above), then save up and get your USA model later.
Or just say screw it, get the lower-end Fender Modern Player, gut the electronics, put in a prewired pick guard with a traditional S/S/S pickup configuration and you've got your "premium" Strat for under 500 bucks. Since it's only the Fender logo that matters anyway, who cares?