It uses neither. CD Audio is not a computer file. In order to record music your car stereo you need a program that converts .wav or .mp3 files to the packet streams that make up the tracks on the disc.
Roxio, Nero and several others will do the job for you. There are also some free programs out there but beware, the last one I downloaded tried to install a trojan virus on my computer.
Also, there are some car stereos that read MP3 files out there.
Craig