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The rental car option is fine for driving from Melaka to other places, but if you are spending a few days in the old town, it would be cheaper and more convenient by far to use the local and modestly priced taxis.
The town has a seemingly complex system of very narrow one way streets, and in some of the more commercial areas, has a system of prepaid parking coupons. There are coupon vendors pretty much all around the town, but it is a minor inconvenience to have to acquire and display them. Another hazard in the old town at certain times of the day is getting caught up in convoys of trishaw drivers. Patience is required. Many of their traffic lights have a nice feature... a big electronic display counting down the seconds to the next change.
Unless you have a good knowledge of the local language and an excellent memory for street names, Melaka can be challenging. Remember too that cars throughout Malaysia have the steering wheel on the right and you have to keep to the left.