Exactly. I'd sue the shit out of her.
First she can pay for a new car, plus punitive damages (it IS a felony due to the cost of repairs, so she should and will be charged with felony vandalism on top of losing in civil court)
She'll also be responsible for pain and suffering. The embarrassment of being arrested in front of co-workers will be enough to score in court, especially in front of a jury.
Now comes the fun part. She'll also be charged (and convicted) for filing a false police report, which means she'll be responsible for the consequences of that one, too. (That means a bigger settlement)
And because he lost his job because of the whole mess he has 2 options. The first and best option is to also sue for lost wages, lots of lost wages. Starting with the exact second he was officially no longer being paid because of the issue, right until the day he finds a new job she'll need to pay him for. A top lawyer will be able to score more if he's getting paid less in the new job, too.
The second option is to sue for lost wages, and also sue the employer to be reinstated at the job. Odds are against you on that one, though, and it will be awkward to work there for sure.
To sum it all up, she owes money for:
- A replacement or at least repairs and rental expenses of the car.
- Lost wages
- Punitive Damages for embarrassment and wrongful arrest
He would be wise to seal the deal by filing criminal charges against her.
- Felony Vandalism
- Filing a false police report
Also: Reading comprehension for the win, how did he get the car to work if the tires were slashed? If the car was still at home (the address it was registered to, or at least somewhere else it would make sense to be, like a family members house or the girlfriends place) then the police would be absolutely wrong in considering the car stolen. The car is, by definition, not stolen if it's where it belongs.
This story stinks to high heaven. After all, If the car is registered in his name, he legally can not steal it. It's impossible, he owns it and can do whatever he wants with it. Some facts are definitely missing here. If we assume that the loan for the car was in both their names then it's possible for her to report the vehicle stolen, but if his name is on the registration for it as well (especially with the car only being a day old, as no payments have been missed) then he has as much legal right to drive the vehicle as she does, especially if it's only to work, and again the police would have a mess in court if he sued for wrongful arrest.
Finally, if the registration for the vehicle was entirely in her name, she can report the vehicle stolen, an arrest would occur, and it would make sense that after a few fact checks they would release him uncharged, as he really didn't steal the vehicle. The insurance would be his best friend here, because if he's an insured driver on the vehicles policy, then he has some proof that he's allowed to drive it.
However, if this is the case, he'll have no recourse in court for damages to the vehicle, but still may be able to score lost wages and punitive damages.