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Here's why you should buy an internal hard drive over and external hard drive: price. For example, as of March 2006, you can by a Samsung 250GB SATA internal drive for $97 online. A 250 GB USB 20 external hard drive from Western Digital costs $159, about 33 percent more for roughly the same storage capacity. Some argue that an internal hard drive has less vibration and will last longer. Others think it's more convenient to deal with a drive within the machine, rather than connected through a USB or Firewire port.
Bottom line: The only difference between internal and external hard drives is price. You pay more for an external drive because it includes a housing and connection.
The better thing to do is: Buy a hard drive enclosure (outer cover of externals they sell at stores) that comes with a USB connection on it. Open it up, and insert your own internal hard drive you buy for cheap and bam . . you got an external hard drive.
External drives are simply internal drives that reside in external enclosures. Because enclosures can cost much less than $60, the difference between an internal drive and an external one may be much less than $60.
Regardless, only put drives in external enclosures when you have a very good reason to.