We propose an auxiliary-bath algorithm for the numerical renormalization group (NRG) method to solve multi-impurity models with shared electron baths. The method allows us to disentangle the electron baths into independent Wilson chains to perform standard NRG procedures beyond the widely adopted independent bath approximation. Its application to the 2-impurity model immediately reproduces the well-known even-and odd-parity channels. For 3-impurity Kondo models, we find successive screening of collective degrees of freedom such as the helicity and the cluster spin, and clarify the false prediction of a non-Fermi liquid ground state in unphysical parameter region in previous literature due to improper treatment of disentanglement. Our work highlights the importance of nonlocal spatial correlations due to shared baths and reveals a generic picture of successive collective screening for the entropy depletion that is crucial in real correlated systems. Our method greatly expands the applicability of the NRG and opens an avenue for its further development.