I would say first replace the pads as that is a much cheaper replacement. You may want to have them bled at the LBS if your not 100% confident on doing it yourself. If that does not fix the issues you should pull the wheel and pads and wrap a thin rag around a bleed block and pull the lever a bunch to see if there is leaking at the caliper. If there is then you have bad seals at the caliper and probably need to replace (or return).