When to renew player contract?

I don't know if anyone's asked that before or not, but I am wondering when it's better to renew the contract of a player who has 2 more years on his current contract /he is signed for this season and the next season that is/? Is it better to renew /from a financial point of view/ the year before the year his contract runs out or in the last year of his contract? Does signing a longer contract affect the performance of a player in some way? Will he command a higher season salary if renewed next season when you go up one level in the game?

I dont know if its cheaper to renew with 2 years left rather than one but my view is that you should leave it as late as u can. His wages wont go up and in the end up you might want to sell him