Try using the open source flac codec. It takes up a fair amount of space, but space is cheap. (500GB for just over $100) I use it for ripping all my music from cd's. It compresses to about 55% of the original size. My collection of 7445 flac files takes up just under 200GB or about 27.3 MB per file. It's better to use lossless because it serves as a backup for the original cd w/o losing anything and because you can convert it to lossy formats w/o any extra degradation.

Ogg is also an open source codec comparable to mp3, but much better suited for audio. It is lossy, but has a better sound at lower bitrates than mp3's. A 128kb ogg file is about the same size as a 128kb mp3 file, but the ogg file will sound like a 192kb or 256kb mp3.

http://flac.sourceforge.net/
http://www.vorbis.com/