I'm sure a few people will advise you to be honest. But in the same situation, they wouldn't take their own advice.
You should lie, to put it simply. Just let her down gently. The last thing someone wants to hear is that they are being dumped for someone else. No one likes being made to feel inferior. Think of a way to end it without bruising her ego.
I can handle ego bruising quite easily. That's why I always follow the safe, easy path of brutal honesty without feeling under direct attack.
Plus, I could never tell a lie convincingly, or hide the truth.