Sie holten uns später ein.

English Translation

They caught up with us later.

Is ein really an indefinite article in this sentence? Isn’t it just the prefix of the seperable verb einholen?

Your analysis is correct.
“Ein” is not an article in this sentence but comes from “jemaden einholen”.= “to catch up with somebody”.

The English transaltion is good.

Btw. “einholen” can be difficult. If the object is a person, as in the sentence above, it is clear.
With things there are two possibilities:
Er wird das andere Auto früher oder später einholen.
(He will catch up with the other car sooner or later)
But:
Ich muss noch einen Liter Milch einholen.
I still have to buy a liter of milk.
“einholen” = southern German, old fahsioned for “to shop/ to buy”, especially with everyday goods.

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