It would probably be cheaper to convert the garage but that will depend on points like - is the wall cavity and insulated, is there a connecting door, has the floor level to be raised, is there a heating system in it etc. With a new kitchen extension you will probably pay that wee bit more but you will have a bit more flexibility in relation to the overall size and layout whereas you are restricted to the size of the garage.
Either way you probably wont need planning permission which is a bonus.
Get a local builder to have a look at it and give you an approximate price for both.