It's a mix of tragedy of the commons and needing to be the same size or bigger than everyone else.
The negatives of big cars are not paid for, in large part, by the people buying the car. A bigger car needs more space, making towns and cities less efficient and more expensive. They use more resources, and gas which the negative effects of are not paid for in pollution and CO2. Edit: Also the danger to pedestrians, and people in smaller cars!
Being a normal sized car, amongst huge trucks is dangerous and all over a bad experience. It's hard to see around them, in a crash you come off worse (all other things being equal). So to not suffer this everyone slowly gets bigger, just to not suffer. If people were limited to a standard sized car then everyone would be better off (assuming people don't need a van for work or a people carrier if they have a large family).