Teacher Sarah Hunt-Squires, aged 51, and veteran Sean Squires, 53, were asleep in their home in Moncrieffe Street, Walsall, when the vandal attack happened.
It is the second time the family, along with their 19-year-old daughter Paige Hunt, have been targeted in six weeks, after bricks were thrown through their front window in May.
The couple say they are now living in fear.
WATCH: CCTV shows shocking attack
She said: “We were in bed when we heard a loud bang and we went running downstairs to find the cars were smashed.
"It was horrendous, I was shocked when I looked at the CCTV.
“It was the fact that he pulled out a machete. When I realised what it was I felt sick to my stomach.
“My husband broke down and he is ex-forces so he has seen the worst.
"We stayed up for nights to see if it would happen again.
"It could have been something much worse and I feel targeted.
"If they can get a machete what else can they get hold of?
“I am absolutely petrified, we fear they are going to kill us.”
The windscreens on both cars were smashed while their silver Proton Satria’s back window was damaged and a window on their Renault Scenic was smashed. A machete and bricks were used.
The incident was caught on CCTV and police are investigating.
Mr Squires said: “They had a 1.5ft machete. What is it going to take to stop this? Are they going to stab me or stab my wife?”
A police spokeswoman said: “Police are investigating after two cars were vandalised outside a home in Moncrieffe Street, Chuckery, Walsall in the early hours of Wednesday 13 June.
"A man wearing a dark Puma hooded top threw bricks at the car windows at around 1.15am.
"He then used a machete to cause further damage to the cars, before running away.
"Anyone with information is asked to call West Midlands Police on 101 giving crime reference 20WS/131376Q/18.”
The incident took place as a campaign by the Express & Star to review the sale of knives gathered momentum.
More than 4,500 people have signed a petition in support of the campaign - click here to sign it now.