The way domains resolve at Netlify is as follows:
example.com in browser → DNS lookup gives browser the server’s IP Address (in this case, Netlify’s) → browser contacts Netlify to serve that domain → Netlify receives the request and maps the requested domain to the database to see which site the domain is connected to → if match found, Netlify serves the website, if match not found, Netlify serves the not found page.
In your case, it absolutely is your decision on what kind of a configuration you’re looking for. Both would work fine, both have their pros and cons. In short, if you’re going to host a lot of subdomains on that domain on Netlify, then Netlify DNS might be a better choice as the DNS would be managed automatically. If not, the choice you make won’t have a huge impact.