If you rent a car in Toronto, it will definitely not have studded tires - they are not allowed in Southern Ontario. In theory a rental car could have winter tires, but in my experience renting cars, even in small towns outside Toronto, they have never had winter tires. (Aka snow tires, these are made of softer rubber and have aggressive tread. I and everyone in my family switch to snow tires each fall and back to summer tires in the spring. "All season tires" are not.)
That said, as long as you stay on major highways (eg the 401 which runs from Toronto most of the way to Montreal) you should be fine. You need to pay attention to broadcasts about conditions though. https://511on.ca/ is an official government site (which is why I am including it as a raw URL) that is usually trustworthy. It fell over during a recent storm-a-geddon over Christmas, but that is unlikely to recur. Here you can see road conditions -- if a road is "snow covered" you should not drive on it without snow tires -- and closures, as well as accidents and areas of congestion.
As you can easily see by looking at pictures taken in Ontario in the winter, they sell small cars here, and people drive them, and generally never have a problem. The size of the car is not the issue, it's the tires. (Sure, 4 wheel drive helps, but mine doesn't kick in on main roads, only on small ones and even then, it's pretty unusual to happen. The little cars will be front wheel drive and that will do you ok, especially on highways.)
You could consider renting a car in Toronto, then returning it and taking the Via train from Toronto to Montreal and renting a different car there. You would skip the longest and scariest parts of the drive that way. The public transit story to Niagara is less good, but Go Transit does have something. It might be a bus depending on the day, you would have to investigate.