It's a new year, and Xbox One owners have likely picked up quite a few new games during the holiday season – perhaps even some of my favorite games of 2015. Some new-gen games take up lots of storage space when installed; Halo: the Master Chief Collection clocks in at 61.4 GB and Grand Theft Auto V is no slouch at 43.5 GB. That gets to be a problem when the Xbox One's built-in hard drive can only store 500-1000 GB (less after OS and such) of data, depending on the model.

Sooner or later, you'll want to invest in an external hard drive for your Xbox One. Doing so will increase your storage capacity and even make games install and load slightly quicker. Installing an external hard drive is a snap, but you probably have some questions if you haven't made the jump yet. We're here to help with this guide to selecting and installing an external hard drive, complete with video!

Why an external drive and what kind should I get?

All Xbox One games must be fully installed to the console's hard drive before use - even retail titles. The Xbox One's built-in hard drive cannot be replaced or upgraded without voiding your warranty, so unless you're into the hardware mod scene, you're stuck with the stock 500 GB or 1 TB (1,000 GB) drive.

Luckily, the console supports the use of up to two external drives at once, making it easy to expand your storage space for games and other content. The external drive must be at least 256 GB large (so very large flash drives are an option) and support USB 3.0. Slower USB 2.0 drives are not supported because Microsoft wants to ensure that data will transfer very quickly between the Xbox One and the external drive.

When choosing a drive, your first consideration should be how much space you want. The console has no limit on external storage size, so the sky is the limit. 1 TB externals run in the $60 range, but I recommend thinking longer term and going with at least 2 TB. 4 TB drives are still relatively affordable for the space they offer ($150-ish), but 6 TB drives get pricey in the $250 range.

How to choose and use an external hard drive with your Xbox One

Your next decision will be whether to seek a drive that requires a separate power source or not. Some drives can draw all the power they need from the console's USB 3.0 port. Other drives include a power cord or AC adapter and won't operate without that extra power. AC powered drives tend to be faster than smaller drives that only need USB power, so I recommend going with the faster drive.

Hard drive speed can be roughly estimated by the drive's RPMs (rotations per minute). 7,200 RPM drives tend to be faster than 5,400 RPM drives. 10K RPM drives are even faster, as are hybrid drives and SSD drives. Theoretically, the faster the drive, the faster games will install, load, and save.

Hard drive speed makes a big difference with computers and some consoles, but it's less of a factor on Xbox One. The Digital Foundry evaluated a variety of drive types, including SSD, and found that high end expensive drives like hybrid and SSD provide little performance gain with Microsoft's latest console. That's bad news for people who like to trick out their equipment with fancier accessories. But it's good because you can get an affordable 7,200 RPM drive without feeling like you're missing out on big speed increases.

Finally, you'll want to choose between the three major hard drive brands: Seagate, Toshiba, and Western Digital. You can find negative reviews of any hard drive you browse online. Ignore individual negative reviews and look at the overall rating from customers. If most owners like the drive, it should be a safe bet. Then again, Seagate drives really do have a higher failure rate than other brands.

I chose a Western Digital 4 TB drive because the price was right. But here are several drives to get you started:

Alternately, you could opt to install an external hard drive enclosure and stick the hard drive of your choice inside of it. This is a good option for people who already have a decent sized laptop or desktop hard drive to spare - you'll just need to buy the enclosure. One such enclosure is the Nyko Data Bank, which works with 3.5 inch desktop hard drives. Read our Nyko Data Bank review to learn whether it might be a good fit for your needs.

See the Nyko Data Bank at Amazon

Installing your hard drive

How to choose and use an external hard drive with your Xbox One

With your drive in-hand, it's time to connect it to the Xbox One. The console doesn't have to be turned off when you connect the drive, although connecting and disconnecting peripherals while powered down never hurts.

Once you plug the drive in, the console will detect it after a few seconds and ask whether you want to set up the external storage device. Say yes and the drive will be formatted and wiped clean of any previously stored data. Note that you cannot share a drive formatted for Xbox One with any other platforms, so don't expect to swap the drive between Xbox One and Wii U or anything.

Next you'll name the external drive. This makes it easier to tell which drive you're interacting with when installing games, copying data, etc.

Having named the drive, the console asks whether you want to install things on it by default. Choose yes and any new game or app you download or install will be placed on the external drive instead of the internal one. This is actually a good idea because games do install and load slightly faster from an external drive than the internal one. Save your internal storage for a rainy day or low-priority apps and games.

Finally, the system will format the drive. Formatting my blank drive only took a few seconds.

Managing your new drive

How to choose and use an external hard drive with your Xbox One

With your external drive installed and formatted, you're ready to install and copy games onto it. Again, I recommend moving all but the lowest-priority games onto the new drive so that they can benefit from the performance increase it brings. The bad news is you can't simply tell the console to move your games at once; each game has to be moved individually.

To start moving games, head to the console's "My games and apps" menu. Just above the game and app tiles you'll see two sorting options. The first lists items by alphabet, recently used, or by size. The second allows you to list items by storage location: all, internal, and external. Until you get everything put into place, you'll want to select Internal.

How to choose and use an external hard drive with your Xbox One

Highlight a game you want to move, press the Menu/Start button, and select Manage game. From there, select the word Internal and choose to Move all. After a few seconds, the console will start moving the game to its new location.

The current requirement that we manually move each game individually is annoying, but you don't have to sit and wait for one game to move before starting to move another. Just select all of the games you want to move, one by one, and the Xbox One will continue relocating them on its own. It will even finish moving them in sleep mode.

How to choose and use an external hard drive with your Xbox One

After you're done moving your games, be sure to switch the "My games and apps" sorting back to All or eExternal. The games and apps menu will now display the total combined free storage and percentage of used storage on the left side of the screen. Hopefully you won't run out of storage for a good long while!