I have towed my Honda Fit with a hatchback-mounted bike rack installed. In my case, that actually was better than a roof rack, because the bike is longer than the car is wide, and it made the car easier to see in my outside mirrors. Without the bike on the rack, all I can see of the toad is the tips of its mirrors. With a bike on the rack, I could see the bike tires as well.
However, in terms of aerodynamics, the roof rack would be a better place to carry the bikes, assuming the toad has enough roof for it and you are physically capable of getting the bikes up and down from the toad's roof.
In other words, either one is fine, just choose which rack you prefer, as long as the option you choose has the capacity you want.
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I thought getting old would take longer!
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