I am looking at car rental prices for July for 1 week in Provence and have found a Peugeot 508 for $ 210.00 through Auto Europe. It is listed as a mid/intermediate size. This is the best price I've found for a car that would have enough storage space to put all luggage and belongings out of sight. Compact/economy car rental rates cost at least as much and often more. Would a smaller car be a better choice for Luberon villages or is it enough of a difference to matter?
You'll be fine. We drove there in a midsize. I didnt notice...
The Luberon is actually pretty wide open, at least between towns. I remember the streets of Rousillon being pretty narrow, so you may want to park and walk to the market, but you should be fine.
Really any car you rent will fit the roads. Midsize in Europe isn't very big. I'd decide based on what level of car fits your group and luggage. I usually rent the smallest but only because it's just me and my carry on.
By European standards a Peugot 508 is a "large family car". See Wikipedia article here: https://en.wikipedia.org/wiki/Peugeot_508
I certainly wouldn't want anything bigger to drive around Local roads in France.
A mid size car is something like a Volkswagen Golf.