Yes, it's not up to you to continue the case against your brother and if you say you reported a car stolen when it wasn't, you will likely get charged with false police report. Let him handle his own case and protect yourself.
Make sure he has a lawyer because he will likely need to go to a jury trial unless you get a friendly prosecutor who is willing to dismiss the charges. You however are the prime witness against him.
If he cannot afford an attorney, he needs to ask the court to appoint him a defense attorney ASAP.
It is a common misconception that the 'victim' of a crime presses charges. In fact, it is the State that presses charges and the victim is just one of the witnesses. That said, you should have substantial influence on whether the prosecutor will go forward with the case, and unless your brother has a bad prior criminal record many prosecutors would let a case like that be resolved by dismissal or substantially reduced charges.
The prosecutor will decide whether or not to proceed with the case, not you. That being said, it is important that the prosecutor have all the relevant information in order to make a good decision. Your problem is your own potential criminal liability. If you lied to the police, you could be charged with filing a false police report. In this case, that charge would be a felony. It is not clear to me what you told the police. If you simply said your car was stolen, and did not say anything about having given your brother permission to have the car, then yes, you will likely be in trouble.
You should probably have an attorney's assistance. Your attorney needs to have all the details of what you told the police. Your own liability is at stake, as well as someone else's. Police officers are NEVER happy with having their time wasted (understandably). The sooner this is dealt with, the better.
Best wishes to you.
Prosecutors office will always take the victims opinion into account. However many prosecutors offices have policies to not let a victim drop charges on domestic violence or any type of assault crime. Property or theft crimes could be different depending on the prosecutor policy.
Call Michigan Criminal Attorneys with any questions 800-665-2451 for a FREE consultation.