My wife is currently going to guitar lessons. She knows how to play “rock” guitar, but is now learning the methods for classical and flamenco. She is paying $25 for a half hour, but as her slot is the last of the day, and last of the week for that matter, it often goes over by 15 minutes or more. This is perhaps helped by the fact that on Fridays she is the only person the guy teaches that started out knowing how to play… he gets to teach to a more advanced level, and gets to play at a more advanced level in the class.
She currently has access to 5 guitars, and is considering a 12 string. But none of that is really salient to your question, because we’re in Australia, and the going rates are not that relative (despite most of the above posters suggesting ours are in line).
Back when she was in high school though, her dad would not buy her a guitar until she knew how to play a little, and knew she wanted to go through with it. This leads to a vicious cycle wherein she needed to find either a teacher who would let her use a guitar (even at a fee), or borrow a friends guitar. Her dad was happy to pay for lessons, but not the guitar, go figure.
So if it’s likely that in your area there are perhaps people for whom an upfront cost of $200+ is an excessive lump sum, but could easily afford say $5 a week over 10 weeks until their child was certain it was what they wanted… then I would say offer the guitars as a rental. You can always waive the fee if you feel the need to. If the parents can barely afford the extra lessons, but they can scrape by because it’s helping their kids. I don’t know.
I am firmly of the opinion that I’d rather spend $250 for a guitar ($200 + 10x$5 rentals), if I knew my kids really wanted it, than spend $200 and waste it after a couple of weeks, when my kid decided that it was not really what they wanted to do… and now let’s try drums!
As a further option, could you possibly justify the cost of a really baseline, plywood top nylon string guitar, and have that around just for teaching purposes. That way any damage to the guitar is not at the risk of you not being able to play shows. Obviously, the cheaper the guitar, the less you’d have to charge for the hiring of it… and maybe even once it was paid off, trash the fees entirely?