It seems too expensive given that £3500 looks like it could get you a car 3 or 4 years younger with a bit of trawling around Aurotrader. Peugeots don't have a great reputation for reliability so a newer car would be a better buy or a car the same age as the one you've identified but for less money and some cash put aside for rainy day repairs. The garage doesn't say anything about service history which would need checking out but at that price I don't think I'd look at it.

In your position I'd look at either a Toyota Yaris 1.3 (better to drive than the press imply) or a Ford Fiesta 1.25 or 1.4 (good to drive and there are lots of them around). The Suzuki Swift is another possibility but there are fewer of them on the market.

The 207 might be OK but any ageing French car is a bit more of a gamble than the ones I've mentioned.