Observe and report for the most part unless there was some overt act of physical aggression and a high chance of injury or death. Better to be a good witness. You do have the right to help/intervene if a forcible felony is occurring though. Too bad the neighbor got hooked up.
I agree with everyone here in that you handled the situation correctly.
If it was my vehicle that was getting beat on I would call the cops but I would also go out (armed but not "brandishing") to try to scare the person off to minimize damage to my vehicle.
In IN you can use reasonable force to protect property which means you can use physical force (not including deadly force) to make someone stop damaging or stealing your stuff. You can only use deadly force if you are being threatened with serious bodily injury.
My opinion is if you are in the act of trying to get the guy to stop beating on your car & he then threatens you with bodily harm you can use DF to defend yourself.