Proof they are not too big. This Matchbox Scenicruiser bus measures the correct 40 feet long - in N scale!
Scenicruiser specifications - source
This is because of two criteria:
1. They have a MINIMUM size. Since they are classified as toys, they must follow regulations set by the CPSC (Consumer Products Safety Commission), which requires toys to pass the swallow test by not passing through a cylindrical opening of a certain size. (Actual HO vehicles marketed to modelers are clearly labelled NOT A TOY in order to be exempt from this requirement.)
2. They also have a MAXIMUM size, defined by their manufacturing tooling and blister packaging requirements.
So vehicles are scaled up or down as needed to fit within those parameters. Passenger cars, being the midrange of vehicle sizes, tend to be the advertised 1/64; yes, larger than HO scale. Stuff we can use for HO models would be larger-prototypes such as buses, trucks, or construction equipment; where deviations from scale are not noticeable to the eye. (Except to the eyes of the rivet counters who visit me occasionally!).
Here are some Matchbox/Hot Wheels vehicles in use on my HO layout. Some have had modifications. Many of them only need some dots of paint for lights and have a license plate painted in.
Matchbox skid-steer loader and carrier details
Matchbox skid-steer loader
Hot Wheels "Combat Medic" as a UPS truck details
Matchbox Datsun as a Hi-rail vehicle details
Matchbox Glass King as a lumber delivery truck details
Matchbox crane as a stacker
Matchbox bulldozer as a trackmobile by removing the blade
Matchbox garbage truck after a paint job details
Matchbox Scenicruiser bus and water delivery truck.
Matchbox stake-body truck with pipe load made by Bill Sweet.