I second that! VW Polo and two kids work - despite being able to buy about any car there is, we stuck with a Polo until last year. All our gear was bought to fit in it. It is possible to find small stuff that fits. People who say stuff for two kids does not fit in a small car have not thought about it long enough or should seriously consider what their "needs" are.

Buy smaller strollers that are easily foldable, instead of bulky ones. Buy smaller and softer bags so they can fill every gap. Buy car seats that are a bit less space taking. The only time we were in a bit of trouble with space was when we went on a big vacation with 4 people. But that happened only once (admittedly, we usually takes flights when going on vacation).