In English law, you are a thief if you 'dishonestly appropriate' another person's property - to my eyes, that's a single action. If the taking ('appropriation') was legal (because all laws are suspended), it doesn't seem like it's theft to hold onto it, and you can't be booked for possession of stolen goods because there was no theft in the first place! I'm not sure where that leaves the payments, though.
In the event of car theft while there is a lien on the car, in the US at any rate, the lien holder requires that the borrower have insurance which will pay off at least the value of the lien in the event the car is stolen or destroyed. So the previous owner had insurance which paid it off.