Toyota Matrix
This is the 2nd time a Matrix has been mentioned- we'll have to look into it. I have had a Corolla in the past that I bought new. We had it until it had over 130K miles on it and it never needed a repair. We shouldn't have gotten rid of it!
FYI, if your kids are in rear-facing child seats, the Matrix is WAY too small. We test drove one and I was so close to the steering wheel that it just wasn't safe.
We actually test drove a dozen vehicles (cars, SUVs, trucks) before settling on a min-van (yes, with only 2 kids). None of the other vehicles had enough leg room in the back, making the front seats unsafe. The van is basically a massive hatchback. We are still a little cramped in the front with the rear facing seat in the middle (why can't they just push those seats back another 6 inches?), but we're not so close as to be dangerous.
The 2nd place vehicle was a 4-door F-250. Sooooo much rear leg room, over double that in the F-150; seriously, hilarious amounts of leg room... front seat all the way back to where you can't touch the pedals and the front seat back is still not touching the rear facing seat in the 2nd row. However, we couldn't find one for a reasonable price, and my wife didn't really want to drive a vehicle that big (I don't blame her).
We also tossed around the idea of a Mazda 5, removing the 2nd row seats and putting the kids in the 3rd row to give us enough leg room. However, the back seats are basically touching the rear bumper, putting the kids in harms way in a rear-end collision... so that was a no-go.
The kids have booster seats but won't need them for much longer.
Missed this on my first read through.
If your kids are forward facing and just using boosters, basically any car will have enough leg room. My nephews fit fine in my tiny 2 door hatchback.