The police can seize a car temporarily if it is evidence. They can seize a car permanently as a “forfeiture” if it was used in any sort of criminal activity, though libertarian-types object since the process doesn’t involve a conviction or even a judicial review (though the owner can sue, the owner has to prove his innocence, which is somewhat un-American). They will seize any care believed to be stolen. They also might seize a car if there is someone else claiming ownership. Many police forces fund part of their budget by seizing private cars, and many opposed to “big government” think this is totally corrupt and unconstitutional.
If a person hires a lawyer, their chance of getting the car back is greatly improved.