We are traveling with two teenagers in August. Would you recommend renting a car or taking a bus from Madrid to Granada? Thoughts? thx
If just going to Granada, why drive. The bus or train would be convenient and probably cheaper if you get advance, discount tickets. The bus is very cheap but a little less comfortable since you really cannot move around.
We are continuing on through Southern Spain then Portugal
I was going to recommend the train, but it appears that there are no longer any direct trains between Madrid and Granada. The bus looks very nice, takes about 4.5 hours. According to viamichelin.com driving takes a little longer. You won't need or want a car in Granada. Take the bus - it will be more comfortable that being strapped into a car.
It sounds like you plan to rent a car at some point. Unless you are returning to Spain after Portugal, it is probably going to be very costly to drop the car in another country.
Train, if it's operating. Bus if not - long distance busses in Spain are pretty nice. You don't need a car in Granada, if you want one after your visit is done, you can rent it in Granada before you leave. Parking it in Granada will be a hassle, and you don't want to drive in town.