Beth, i see a "split decision" regarding driving in Greece... and I think you can only decide once you settle on the exact # of days in Crete, how many days in the Chania area, -- exactly WHAT sights you want to see on or near the south coast -- what you want to see in/around Heraklion and whether you are leaving via ferry or by plane.
It helps to use a great online map for advance ponder -- https://www.explorecrete.com/crete-maps/images/Crete-eot.png Click & it gets huuuge.. navigate via side-slides. It shows TERRAIN, making it clear how limited yur N - S routes are. If you DRIVE s. to get to Loutro, you have to go down the rim-road of Imbros Gorge -- my driver (in 2001) lives in Colorado, had fantasies of being a Grand Prix champ, and Loooved the 26 hairpin switchbacks! Others experiences may differ. And if you drive, you'll hve to leave car parked in Hora Sfakion while you stay in Loutro. BTW, what's all this about staying in Loutro awhile?? Frankly i think 2 nights would be plenty since I don't think you are attempting cliff walks or other gorges. Its beach is tiny... People go there to hike. We hiked down Imbros Gorge, got a taxi (pickup truck actually) back up to Imbros start, then drove down that 26-switch rim road. We stayed in Frangokastello ... the castle is fascinating for 30 minutes, beach is nice but THE shallowest in greece... you must wade 200 yard to get knee-high. We then parked car in Hora Sfakion, took ferry to Loutro, had lunch, then did the cliff-to-beach-tocliff-to-beach thrill hike back to Chora Sf. Exhirilating but scarey; I did it 20 years ago & triumphed over acrophobia, but now/?? never. Today? I would take bus from Chania down those switchbacks, ferry to Loutro for 2 night max, then back & bus back to Chania.
After THAT, your car trip can explore wonderfully and easily. The back road (below the Big N. Highway) from Chania = Rethymon, then South (very good road) thru Spili .... Here you could detour and go down the WEST road of beautiful Amari Valley, then emerge close to Ag Galini. Matala is uncrowded at the time you're going, & I have a great place to stay just back from the beach, Villa Dimitri. Nearby ruins areas - Phaistos, Komo, Ag Triada ... you can linger on the way N.E. Toward Heraklion area -- Zaros in foothills is where the MOST popular water in greece is bottled... All round is Cretan Vineyard country.
Moving on to Heraklion area -- what do you want to see?? Top Two = Heraklion Museum and Knossos. Some say, see Museum first because then you'd appreciate ruins more... opinions differ. What you SHOULD do is minimize driving IN Heraklion.. madness. If u do Knossos first, map shows u can totally bypass the city to Knossos area, stay around Archanes, jst south of ruins site. Either go at 8 AM or after 3 pm to Ruins, to avoid crowds/sun. You can return car at airport & take easy local bus in to Heraklion, stay right on seafront (I recommend Hotel KRONOS specify sea view balcony), walk to Museum & at evening to FOrtezza & seafront cafe liek Hippocampus. Convenient for leaving on AM ferry or (via taxi) back to airport... no driving/parking hassles in city.
About the start in the Chania area, you'd have to tell us if you want to stay in town or just outside on a beach (see Hotel AMMOS) and take local bus 20 mins into heart of Old Town your choice. U may want a 1-day car rental for particular sights E or W of Chania. You have many months to plan... have fun!