UPDATE 1-Santander set for RBS UK branches deal Tues -source

* Santander to buy 318 branches at premium to NAV -source

* Final price will depend on NAV at time of completion

* Business banking key market for Santander in UK (Adds details from source on branch deal, background, report of Santander car loans deal)

LONDON, Aug 2 (Reuters) - Spain's Santander (SAN.MC) is set to seal the purchase of over 300 UK branches from Royal Bank of Scotland (RBS.L) on Tuesday as the Spanish bank bulks up in one of its core markets, a person familiar with the matter said.

The branches are likely to be sold at a small premium to net asset value (NAV), which will not be known until the deal completes, the source said.

The deal is expected on Tuesday, but may slip to Wednesday, he added.

Santander, the euro-zone's biggest bank, has been in exclusive talks with RBS and has long been the front-runner to buy the 318 branches, attracted by the significant small- and medium-sized business customers in the deal. Sources have previously said it was likely to pay about 1.8 billion pounds.

In the United States, Santander has agreed a preliminary deal to buy $4.3 billion of car loans from HSBC (HSBA.L), according to the Financial Times. HSBC said on Monday it had agreed a sale, but declined to say who to.

The newspaper said Santander is also considering a deal to buy M&T Bank Corp (MTB.N), the Buffalo, New York-based group.

RBS, 83 percent owned by the UK taxpayer, is also close to agreeing the sale of its payment processing business to private equity firms Advent International and Bain Capital for between 2 billion and 2.5 billion pounds, sources have said.

RBS has been told to sell both businesses as a cost of taking billions of pounds in rescue funds from the UK government.

Both RBS and Santander declined to comment. (Reporting by Steve Slater and Karolina Tagaris; Editing by Tim Dobbyn)