In an interview with Sky Sports in Italy, Binotto also admitted that the signing of Sainz for next year represented a "gamble" for the Scuderia given the new partnership with Charles Leclerc will give them their youngest line-up since 1968.
But he is confident it is one worth taking to begin a "new cycle" as they bid to end their long wait for F1's world titles.
Vettel, the four-time world champion who has been with the team since 2015, will leave at the end of the delayed season after he and the team decided against renewing his contract.
"I think it was the right thing for him and for us," said Binotto, Ferrari's team principal. "Only Seb knows what he will do in the future. He's a great driver and he'll make the right choice.
"He spent six years at Ferrari and the team has a special place in his heart. We have a good relationship with him, which isn't to be taken for granted when there's a parting of ways.
"There's a mutual understanding of the reasoning behind this change."
With McLaren immediately snapping up Daniel Ricciardo to replace Sainz, and Ferrari's chief rivals Mercedes and Red Bull thought unlikely to move for Vettel, the German's future in F1 into 2021 is very uncertain.
Binotto added: "As for Vettel's future, I think he's so passionate about this sport. He'll want to get back into it, although he'll have a few things to think about. We're looking at a long-term project."
That 'long-term project' means Ferrari now have two of the grid's most highly-rated youngsters signed up for the next few years. Sainz is 25 years old, with Leclerc three years younger.
But, unless Leclerc wins the title this year, Ferrari will start 2021 without a world champion in their line-up for just the second time in the last quarter of a century.
But Binotto has faith in their new bold path.
"During this period, we've had time to reflect, mull over and reach this conclusion," said the Ferrari boss. "We're pleased with our choice.
"The world has changed during this time and we have to look at the future of F1 in a different light. There's a new challenge that we must all embrace and we believe we've singled out the right person to complete our team.
"Carlos Sainz is a young driver and Ferrari haven't had such a young driver pairing in 50 years. It's a gamble for us and we're happy to be taking on this challenge. We want to begin a new cycle.
"It'll be a tough path, but putting faith in youngsters is also geared towards that, not just for the drivers, but also for the mechanics. Sainz is a very nice and intelligent guy.
"He is a real team player and works very hard, so having him alongside Charles will be useful. He's done well over the last five seasons and has almost always reached the finish line, earning his team so many points in the process."
Although the two parties already know that their relationship has barely half-a-year to run, Binotto is expecting a strong swansong from Vettel when the 2020 campaign does eventually begin.
"I expect him to do very well this year because he's a great professional and we hold him in high regard," he predicted.
"We'll have to give our drivers the ideal car to be able to perform at their best."
F1 is aiming to start the season at the Austrian GP on July 5, with a second race at the Red Bull Ring following a week later. On Friday, Silverstone confirmed it had agreed terms for a similar double-header several weeks later.
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