"Memory is unreliable, it's not even that good" makes no sense
It's one of those attractive statements that are easy to take as a 'fact' without thinking about it much.
However, when you stop to think about it, you can notice that it falls apart.
Sure, in the cases of 'plenty of contradictory eyewitness testimonies of an event', there will be 'unreliable' memories, but when you think about your everyday life, and how EXTREMELY useful and GOOD your memory really is, you have to admit the power of memory, even if it's a bit hazy.
I can't imagine memory changing the color of a car, unless you are colorblind or colors of cars don't matter to you, or you live in the modern times, where cars practically don't have any color.
Let's say you see a retina-burningly brightly neon-green Volvo. Then a week later, someone asks what color that car was, is there ANY chance you would think it was pink, blue, red, purple or black?
Then think about how absolutely amazingly good your memory is when it comes to things like major events, locations, your personal history and such things. You may forget or warp some details here and there, but you won't forget where your nearest grocery store is, you remember where the railway station in your city is, you remember where your kitchen and toilet are, and so on.
ABSOLUTELY reliable.
Memory is not that good? If it wasn't, we'd all be bumbling all over the place every day, forgetting what fork is for, or what to do in the toilet. We'd forget to brush our teeth and how to drive a car, we'd get lost every time we step out, and then we could NOT find our way back in - - - you get the idea.
If Lenny's statements were true, no one could rely on their memory enough to function in the world pretty much at all. You couldn't even remember what color your car is or where you parked it.
In actual reality, memory is VERY reliable, and it doesn't commonly change colors or shapes of things - Lenny's stupid explanation is just a rationalization to try to minimize his current condition so he wouldn't feel so bad about it.
This is a common coping mechanism - when something hurts you, you can diminish the pain a bit by rationalizing it (whether it makes sense or not), and thus minimizing the importance or power of the pain. 'Nah, I didn't want those oranges anyway, they're kinda sour this time of year'. Now you won't feel so bad that you couldn't get the oranges.
'Memory isn't that good' means Lenny doesn't have to feel so bad about not having it.
But memory is REALLY good! You remember names, numbers, icon places, menu items and so on. Think about just how many things you impeccably and 100% reliably remember when playing some complicated computer game, such as a RPG. You remember exactly where every spell is, what every menu item does, how to get to a specific setting although you have to wade through seven menus to get there, and so on.
If Lenny was even 20% right, you ABSOLUTELY couldn't.
I just wish Joe Pantoliano's character had been a bit more efficient in debating Lenny about this and giving proper counter-arguments. Lenny kept interrupting him, though, but all he had was 'oh, please'. That's it? Come on, you are a COP, you are supposed to be able to handle complicated situations and debate this kind of things.
Sure, 20 eyewitnesses may remember the shape or color of a car a bit differently, but usually it's in a case of an event that happened pretty quickly, no one had a GOOD, slow look or repetition about it to really remember it correctly. If something just whizzes by and then something else crashes and you hear an explosion and then it's just a mess on fire, it's hard to remember everything exactly.
But if you go to the same grocery store for 20 years, you can wake up and be 100% confident your memory if that store's location is accurate.
Lenny even counters his own argument later, when he says 'see, certainties' (though I SO wish the moviemakers had had the guts to add some really weird sounds here, to mess with Lenny or the audience or something, and to underline that nothing is so certain!)..
..how can there be certainties, if memory is unreliable? Lenny is still relying on SOME kind of memory to know about those 'certainties' (I wonder if that's how it works in real life though, would someone remember what a knock on a table sounds like, if they have 'lost their memory'?)
In any case, most memory is extremely reliable, people don't usually have very distorted memories of things that are important, useful or practical, so it's a VERY, very good thing to have indeed. Lenny, as usual, is full of BS when he tries to paint memory as something unreliable and detail-changing.
I would also argue that it's pretty rare that a whole color of a car could change that much. Sure, if you see it only ONCE in your life, you might have tough time remembering the exact shade of 'concrete wall' 35 years later, but absolutely no one can convince me that the yellow sports car I drew in GTA was blue, or the neon-green car was pink.