The team announced the extension for Sanchez in a conference call Friday night, and general manager Mike Tannenbaum said the Jets "looked at" going after Manning before deciding to stick with Sanchez.
"We looked into Peyton Manning, who obviously is a first ballot Hall-of-Famer, tremendous person, tremendous player that we all know, and we looked into it," Tannenbaum said in the conference call. "But again, like I said, as events continued to unfold, we continued the negotiations with Mark -- and what's important for us is where we are tonight, which is, Mark is our starter, and we're excited about 2012."
The extension is for $40.5 million, averaging $13.5 million per year, NFL Network insider Jason La Canfora reported. That gives Sanchez five total years on his deal totalling $58.25 million, with $20.5 million fully guaranteed and no offsets in 2012 and 2013.
La Canfora reported that the deal makes Sanchez the sixth- or seventh-highest paid quarterback in the NFL. Also, Sanchez has an additional $10 million in potential escalation, pushing the maximum value of the three-year extension to $50.5 million and $68.25 million for the entire contract, according to La Canfora.
Also worth noting is his age, 25, meaning he'll be a free agent for the first time at age 30 if he plays out his contract.
Sanchez had two years remaining on the five-year, $44.5 million deal he signed when the Jets made him a first-round draft pick in 2009. It included $28 million in guaranteed money.
That collapse led to speculation they would pursue Manning, who was released by the Colts on Wednesday.
"That's part of Mr. Tannenbaum's job, to look at every viable option," Sanchez said. "The best part about it is they chose to stick with me. I'm going to be the starting quarterback for the next few years here. That's exciting. It gives the team just a reminder that I'm the leader of this team."
The Associated Press contributed to this report.