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We were planning to visit Toronto for a few days and thought of renting a small car (Kia Rio/Chevrolet Spark or similar) during the Winter. The plan is to visit Niagara Falls and visit Montreal and come back. What we mainly wanted to know is,
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.
Quebec requires winter or all-weather (not, as @mbrig points out, "all-season" or "M+S") tires on all cars between December 1st and March 15th. The tires either need to be studded (rare, especially in the cities) or have the logo shown below. This is true for rental cars as well (rules here) and contra @KateGregory, my experience is that the rule is typically obeyed: all 10+ of my winter rentals have indeed had them.
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Snow tires do help a lot, but they’re not a panacea, so drive carefully and pack some emergency supplies if you can (water, warm clothes, a blanket, etc). That said, snow clearance in Montreal and on major highways is usually very good. Public transit is also solid in Montreal, so it might be worth seeing whether you need a car at all.
First, the suggestion that snow is a problem in Toronto is misguided. Indeed the city is remembered for calling the army after a storm in the late 1990s (see this associated video) In many ways this makes snow in Toronto and area a serious problem as few drivers have experience with driving on snowy surfaces. Thankfully there usually is very little in the way of accumulation in the city itself: snow rapidly turns to slush, which makes sidewalks unpleasant but does not impede driving much. Your major ennemies will be parking and traffic.
Certainly the main highways of the 400 series around and south of Toronto will not be on snow: there is just too much traffic for any precipitation not to melt. You will likely have a wet surface. My experience with tires on rentals is variable but if you are careful you will be no worse off than the average driver.
Driving between Toronto and Montreal on the 401 is an interesting experience, especially as you exit Toronto. There is a lot of trucking on this highway. There are a lot of service stops but (in winter at least) it’s not a terribly memorable drive.
I do not know what you plan to do in Montreal but the metro (subway) is very good there and will efficiently take you to the major tourists spots without having to chase parking spaces. The streets of downtown Montreal are usually on wet pavement so regular winter tires are usually enough.
On balance, aside from your Niagara trip, you can largely do without a car within Toronto and Montreal (unless you want to go to the Toronto Zoo, which is a little out of the way). Driving should not be a problem unless you choose to drive in a snowstorm. Given the price of rentals and gas these days, it is likely cheaper to use public transit, and not that much more trouble if you factor chasing and paying for parking.
You can easily travel by train between Toronto and Montreal. There are multiple trains per day, they are reasonably comfortable and competitively priced (unless you buy walk-up fares). My European colleagues often state they are more spacious than many European trains, although I did not notice that much difference. It is certainly a lot more relaxing than driving along the 401.
To add on to @MattKrause's answer above, you need winter tires when driving in Quebec:
Looking quickly, it appears that all car-rental agencies in Quebec use winter tires.
Example #1 - Dollar
Example #2 - Hertz
Optimal solutions:
One very important point that’s mentioned in existing answers but deserves more emphasis: Do you have experience driving in snowy/icy conditions? It involves several specific skills that you never learn or practice in milder climates — not just driving on low-traction surfaces, but also judging how the snow/ice on the road will affect the traction.
If you have some previous experience, then the specific details in other answers should allow you to judge the suitability of the plan. But if you don’t have previous experience, I advise being very cautious — at minimum, plan for a few hours’ driving on small/quiet roads before hitting the highways, to practice in the local conditions. I’ve seen too many experienced warm-climate drivers underestimate the challenges of harsh winter conditions.
Edit: this answer is meant as an addition to the excellent advice in other answers, not an alternative to them.
